The Zimbabwe Stock Exchange’s linchpin All Share Index continued heading southwards in the week to Wednesday 27, 2019 in a trend that some market observers say is a “market correction”.
The bearish trend began soon after the announcement of the Monetary Policy Statement by the Reserve Bank of Zimbabwe (RBZ) governor last month, which is perhaps indicative that (foreign) investors have taken guidance from the policy shifts.
In the week under review, the All Share Index was down by 6,52 percent to 120.55 points from 127.07 points prior comparable period.
And the year-to-date loss was more significant at 17,57 percent.
The local bourse’s other indices have followed a similar trend, with the Top 10 Index going down by a similar 6,5 percent to 113.42 points from 119.95 points previously.
The Industrials Index was the biggest loser during the week under review, closing at 402.07 points from 423.53 points, a 21,4 percent dip.
The Mining Index also experienced heavy losses, down 13,2 percent to close at 188.46 points from 201.72 points last Wednesday.
The ZSE’s market capitalisation has dropped by 6 percent to RTGS$15,8 billion this week from RTGS$16,8 billion last week, which is lower than highs of circa RTGS$19 billion recorded at the beginning of the year.
Zimbabwe has been struggling with foreign currency shortages and exchange issues over the past few years as forex trading was dominated by black market trades due to the lack of an official forex trading market.
The resultant loss of monetary value led to investors to hedge their monies on the ZSE as a means to protect value. However, with the introduction of an inter-bank foreign currency exchange platform last month, investors are likely to have taken cues on the long-term.
“In our view, the market continued on an upward trajectory since October 2018 on expectations of a devaluation of the RTGS. The separation of the Nostro FCA and the RTGS FCA (despite the RBZ governor insisting on 1:1 exchangeability between the USD and the RTGS) was the first clear sign that the two were not the same.
“Stocks became a safe haven for value preservation at a time when property (another value preservation strategy) was now quoted in USD, which was beyond the reach of most institutionals,” said Akribos Research Services in a recent note.