ZSE Market Commentary 22 July 2024

Focus turns to Treasury’s mid-term as ZSE maintains rally

HARARE – Finance Minister Mthuli Ncube will present the mid-term budget review on Thursday which is expected to show strong focus on two key areas; boosting local currency use and measures to boost agricultural output as the country gears up for recovery following the 2023-24 drought.

The mid-term budget review is an instrument to track how well the national budget, as tabled at the beginning last year, has been executed, and to allow for priority reshuffling if there is any need. The budget will be recalibrated to ZWG from ZWL it was presented in last year while Ncube said there would be no supplementary budget. The budget balance for the first quarter of 2024 was a deficit of ZWL18.9 billion, which was mainly financed through exchange rate gains (changes in Government current deposits).

The economic growth forecast will be revised to 2% from the previous 3.5% and next year’s growth is targeted at 5%. In order to set the economy on a path of recovery following the impact of last season’s drought, much focus will be on measures to boost agricultural output to ensure food self-sufficiency at both household level and country level. Industry is targeting to get incentives and better taxation regimes to enable recovery but it’s unlikely that the Minister will avail any in light of the well-known public sector pressures.

Ncube said Treasury and the Reserve Bank of Zimbabwe continue to be aligned and are working “well together” through the Liquidity Management Committee. In order to support this, the Minister is expected to announce measures to increase the demand for ZWG and its subsequent use as they seek to lower the usage ratio which is now at 90% USD is several sectors against 10% local currency.

Inflation risk is now low and the pressure on the exchange rate is not expected to be high for the remainder of the year. What continues to be a drag is the lack of a tangible arrears and clearance plan and hopes are that the Minister will dedicate more space to this. Total Public and Publicly Guaranteed debt stock, as at end March 2024 stood at US$21 billion, comprising of external debt stock amounting to US$13 billion (61.9%) and domestic debt stock of US$8 billion (38.1%). To service its debt, Government paid ZWL174.4 billion and US$102.7 million on maturing TBs during the first quarter of 2024.

Meanwhile, Finance permanent secretary George Guvamatanga told journalists after a routine engagement with the Budget and Finance Parly Committee, that there was need to align the Auditor-General’s department to the other pillars of auditing within government so that their reports can be released on time and properly reconciled to government operations. This comes amid concerns about revelations in the recently released 2023 reports. The major noise was around non-delivery of vehicles across all ministries, which Guvamatanga said was not accurately audited.

He said that government had a centralised internal audit department where procurement processes and reconciliations are made. However, the AG’s department does not make use of this department and continues to operate independently. “We need to align the department with other auditing units. For instance, the report highlighted non-delivery of cars at 197. As of June 2024, only about 20 had not been delivered. There is an information gap between the departments.”

Elsewhere, Zimbabwe Stock Exchange shares remained in positive territory with the All Share Index gaining 1.75% to close past a key level after a stellar performance from mid-tier stocks. The All Share closed at 203.32 in a session which yielded 20 risers against three fallers. The Medium Cap Index rose 4.05% to 168.89 and the Top Ten was 0.75% higher 212.94.-finx
Bulls n Bears

ZSE and VFEX in Mixed Performance on Monday Amid Uncertainties

The ZSE opened the new week on a sustained growth streak, despite a slow-down in magnitude of growth as overall sentiment was mixed owing to uncertainties of value preservation. This is premised on the spiraling exchange rate premium which has widened to over 70%. The mainstream ZSE All Share Index surged by 1.75% in early week trades to close at a record high of 203.32 points, with gains evenly driven by market heavies while medium caps and 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 103.3% nominal return, which converts to 101.4% in US$ terms. On a month-to-date basis, the ZSE All Share Index is up 58.1%, buttressing a nominal return of 27.3% garnered in June.

The US$ denominated bourse, VFEX, took a breather on Monday as oscillatory performance sustains amid policy uncertainties around foreign currency markets. The mainstream VFEX All Share Index retreated by -0.8% today to close at 104.54 points, with losses driven by 2 laggards which outweighed 6 risers. 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 the month, the VFEX is up 1.8%, buttressing a 5.6% growth registered in June. On a year-to-date basis, today’s performance trimmed gains to 4.5%. An aggregate of US$12,217 exchanged hands in today’s session, down from US$229,379 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 0.1% against the US$ to close at ZiG13.70. The Central Bank computes the exchange rate by dividing the US$ by gold price per milligram.

An aggregate of 25 counters exchanged hands in today’s session, with 2 sailing stable while 20 emerged risers. Star Africa came out as the top performer in the session on rising 16.85% to settle at 0.89c, extending gains to a 3rd straight session. The duo of CAFCA and ZBFH went up by 15% each to close at 1840c and 1201.95c respectively, followed by Masimba which firmed by 12.22% to settle at 230c. OK Zim extended gains to a 4th consecutive session on notching 10.13% to settle at 64.58c, capping off the Top 5 risers’ set.
On the downside, a total of 3 counters partially weighed on the market. Turnall performed the worst in the session on dipping -9.09% to close at 5c, trailed by Proplastics which lost ground by -0.05% to settle at 90c. ZHL countered prior session’s gains on retreating -0.04% to close at 29.04c, capping off the laggards’ pack.

Total turnover rose by 223% from prior session’s record to ZiG18.39 million today against a 183% increase in overall shares traded. Econet led turnover contributors in the session, contributing 72% of the aggregate turnover and was trailed by Delta, CBZ, EcoCash Holdings and ZHL in that respective order. Overall foreign inflows contributed 3.3% to aggregate turnover while outflows held a foothold of 18.2%.

COMPANY EVENT

ZHL 26th AGM to be held at 206 Samora Machel Avenue, Harare on Tuesday, 30 July 2024 at 1100 Hours
Equity-Axis