ZSE Market Commentary 29 May 2024
ZSE and VFEX Sharply Rise as ZiG Continues to Devalue on Interbank
The ZSE recouped prior session’s losses in mid-week trades as improving liquidity of the local currency against a sustained exchange rate stability since the inception of ZiG drove demand for stocks. The mainstream ZSE All Share Index gained 1.88% today to close at 102.1 points, with gains driven by market heavies which outweighed a mild decline 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 2.1% in nominal terms, which translates to 4.2% in US$ terms. On a month-to-date basis, the ZSE is up 3.4% and 4.3% in nominal and US$ terms respectively.
The US$ denominated bourse, VFEX, held on to an oscillatory trajectory which has spun to 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 went up by 0.57% today, heavily countering prior session’s losses to close at 96.28 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 -3.3%, against a -1.4% loss suffered in April. On a year-to-date basis, the All Share Index has shed off -3.7%. An aggregate of US$1,127 exchanged hands in today’s session, down from US$234,737 traded in the prior session.
On the currency markets, the Zimbabwe government introduced a new currency on the 5th of April 2024, backed by gold reserves and foreign currency. The Central Bank also announced new monetary policy measures on the same day, further tightening its stance on money supply while, however, slushing borrowing costs from 130% to 20%.
The new MPS highlighted that the currency auction market has been replaced by the Interbank market, which will be used to liquidate all ZWL balances into Zimbabwe Gold (ZiG), the new currency. Today, the ZiG depreciated by -0.19% against the US$ to close at 13.30. The Central Bank computes the exchange rate by dividing the US$ by gold price per milligram.
An aggregate of 18 counters exchanged hands in today’s session, with 4 sailing stable while 7 emerged risers. Fidelity came out as the top performer in the session on surging 13.63% to settle at 75c, followed by Delta which extended gains to a 6th straight session on rising 7.69% to close at 815.57c. Proplastics went up by 1.03% to settle at 44c while Meikles buttressed prior session’s gains by a further 0.78% to close at 262.08c. FBCH notched up 0.48% to settle at 184.33c, capping off the Top 5 risers’ set.
On the downside, 7 counters partially weighed on the market. Nampak performed the worst in the session on dipping -12.5% to close at 35c, reversing prior session’s gains while Econet extended prior session’s losses by a further -4.11% to settle at 180.32c. EcoCash Holdings extended prior session’s losses by a further -3% to close at 16.81c, trailed by Star Africa which shed off -2.47% to settle at 0.79c. ZHL fell for a 3rd consecutive session by a further -2.28% to close at 34.01c, capping off the Top 5 laggards’ pack.
Total turnover fell by -60% from prior session’s record to ZiG0.31 million today against a -54% decline in overall shares traded. Delta led turnover contributors in the session, contributing 80% of the aggregate turnover and was trailed by Econet, ZHL, Meikles and EcoCash Holdings in that respective order. Foreign inflows contributed 0.11% to aggregate turnover while outflows held a foothold of 0.67%.-EQUITY-AXIS