ZSE Market Commentary 28 May 2024
ZSE and VFEX Plunge Amid Liquidity Constraints as ZiG Loses Grip on Interbank
The ZSE halted a fresh bull-run on Tuesday as the bourse continues to oscillate around the base index amid scarce liquidity and a sustained exchange rate stability since inception of the new currency. The mainstream ZSE All Share Index shed off -0.46% today to close at 100.26 points, with losses driven by market heavies which outweighed a mild growth in medium caps while penny stocks remain constant since the rebasing of indices. Following the introduction of a new currency, the ZiG, which replaced the ZWL, the ZSE changed its functional currency to ZiG, and rebased all indices to 100 on the 8th of April in a bid to effectively reflect the effect of the new currency on financial markets.
Likewise, all share prices were also converted to ZiG at a rate of 2,498.65 upon introduction. Since the rebasing of indices, the All Share Index is up 0.3% in nominal terms, which translates to 2.5% in US$ terms. On a month-to-date basis, the ZSE is up 1.5% and 2.6% in nominal and US$ terms respectively.
The US$ denominated bourse, VFEX, has maintained an oscillatory trajectory for over 2-weeks now owing to liquidity constraints as well as policy uncertainties amid heightened involvement of the government in the economy. The mainstream VFEX All Share Index lost ground by a mild -0.04% today to close at 95.73 points. The All Share Index was rebased to 100 at the end of 2023 following the addition of six new listings in 2023. Since the beginning of May, the market is down -3.9%, against a -1.4% loss suffered in April. On a year-to-date basis, the All Share Index has shed off -4.3%. An aggregate of US$234,737 exchanged hands in today’s session, up from US$99,513 traded in the prior session.
On the currency markets, the Zimbabwe government introduced a new currency on the 5th of April 2024, backed by gold reserves and foreign currency. The Central Bank also announced new monetary policy measures on the same day, further tightening its stance on money supply while, however, slushing borrowing costs from 130% to 20%.
The new MPS highlighted that the currency auction market has been replaced by the Interbank market, which will be used to liquidate all ZWL balances into Zimbabwe Gold (ZiG), the new currency. Today, the ZiG depreciated by -0.27% against the US$ to close at 13.28. The Central Bank computes the exchange rate by dividing the US$ by gold price per milligram.
An aggregate of 21 counters exchanged hands in today’s session, with 6 sailing stable while 8 heavily weighed on the market. Tanganda Tea Company came out as the worst performer in the session on slumping -14.71% to close at 145c, extending prior session’s losses while Econet reversed prior session’s gains on easing -8.92% to settle at 188.04c. ZHL extended prior session’s losses by a further -3.41% to close at 34.81c, trailed by EcoCash Holdings which partially set off prior session’s gains on softening -1.77% to settle at 17.33c. Star Africa retreated by -1.17% to close at 0.81c, capping off the Top 5 laggards’ pack.
On the upside, 7 counters partially countered the laggards. Nampak emerged the top performer in the session on rising 5.26% to settle at 40c, recouping prior session’s losses while Delta extended gains to a 6th straight session on adding 2.38% to close at 757.30c. FMP firmed by 2.36% to settle at 37c, followed by Meikles which went up by 2.06% to close at 260.05c. OK Zim partially recouped prior session’s losses on gaining 1.61% to settle at 38.91c, capping off the Top 5 risers’ set.
Total turnover fell by -71% from prior session’s record to ZiG0.79 million today against a -52% decline in overall shares traded. Econet led turnover contributors in the session, contributing 34% of the aggregate turnover and was trailed by AFDIS, NMBZ, Delta and Hippo in that respective order. Foreign inflows contributed 0.19% to aggregate turnover while outflows were nil.-EQUITY-AXIS