ZSE Market Commentary 02 July 2024
ZSE and VFEX Bullish as Inflation Stabilizes in June
Following a zero percent inflation rate for June as reported by ZIMSTAT amid exchange rate enforcement by the government, the ZSE opened the new month of July on an accelerated bull-run. Avid investors also capitalized the increased local currency liquidity to benefit from reduced capital gains tax. The mainstream ZSE All Share Index was up 5.05% on Tuesday to close at a new record high of 137.88 points, with gains evenly spun between market heavies and medium caps while penny stocks sailed stable. 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 boasts of a 37.9% nominal return, which converts to 36.7% in US$ terms. In June, the ZSE gained 27.3%, buttressing a nominal return of 2.28% garnered in May.
The US$ denominated bourse, VFEX, sustained gains on Tuesday, extending the positive trajectory to a 5th consecutive session which is a remarkable record performance as increased use of foreign currency in the economy fueled demand for VFEX stocks. The mainstream VFEX All Share Index gained 0.6% today to close at a 4-month high of 103.66 points, with gains driven by 3 risers which outweighed 5 laggards. The All Share Index was rebased to 100 at the end of 2023 following the addition of six new listings in 2023. In the just ended month of June, VFEX grew by 5.6%, recouping a -2.3% loss suffered in May. On a year-to-date basis, VFEX is up 3.7%. An aggregate of US$143,151 exchanged hands in today’s session, up from US$106,340 traded in the prior session.
On the currency markets, the Zimbabwe government introduced a new currency on the 5th of April 2024, backed by gold reserves and foreign currency. The Central Bank also announced new monetary policy measures on the same day, further tightening its stance on money supply while, however, slushing borrowing costs from 130% to 20%. The new MPS highlighted that the currency auction market has been replaced by the Interbank market, which will be used to liquidate all ZWL balances into Zimbabwe Gold (ZiG), the new currency. Today, the ZiG appreciated by a mild 0.08% against the US$ to close at ZiG13.69. The Central Bank computes the exchange rate by dividing the US$ by gold price per milligram.
An aggregate of 28 counters exchanged hands in today’s session, with 2 sailing stable while 21 emerged risers. The trio of ZBFH, CAFCA and BAT topped the risers’ list on notching up 15% each to settle at 370.30c, 874c and 2633.78c in that respective order. Unifreight firmed by 14.91% to close at 50.10c, followed by RTG which went up by 14.82% to settle at 24.40c, capping off the Top 5 risers’ set.
On the downside, a total of 5 counters partially weighed on the market. Ariston performed the worst in the session on dipping -12.21% to close at 3.51c, extending prior session’s losses while Zimpapers shed off -8.24% to settle at 4.60c. OK Zim fell for a 3rd straight session by a further -1.94% to close at 51.82c, trailed by ZHL which partially countered prior session’s gains on easing -1.87% to settle at 30.42c. General Beltings lost ground by -0.40% to close at 5c, capping off the Top 5 laggards’ pack.
Total turnover rose by 283% from prior session’s record to ZiG6.61 million today against a 162% growth in overall shares traded. Econet led turnover contributors in the session, contributing 59% of the aggregate turnover and was trailed by Delta, OK Zim, Meikles and RioZim in that respective order. Foreign inflows contributed 3.1% to aggregate turnover today while outflows held a foothold of 2.6%.
Equity-Axis