The last couple of weeks since mid-September have been very exciting for stock market investors.
The excitement is not surprising though. After recording a 30,31 percent gain in September, the market has already notched another 23,6 percent in market value before we get to the middle of October.
By the close of trading yesterday, the ZSE was valued at $1,236 trillion or US$ 14,2 billion using the official exchange rate and US$7,3 billion using the parallel market exchange rate of $170.
Whatever valuation one may want to use, most, of course not all, investors are in the money.
Race to the top
When we closed the month of September, Delta with a market capitalisation of $143,8 billion was the ZSE’s most valued counter.
Econet was second valued at $134,7 billion. But fast forward to yesterday, Econet had taken over the throne to become the market’s most valued counter at $181,3 billion.
Delta is now second valued at $165 billion. While the Econet has not released any fresh information, apart from a 30 percent approved upward adjustment of tariffs, the market anticipates it to be the biggest beneficiary of the accelerated working and schooling from home.
This unprecedented reliance on connectivity for digital services and customer interactions is expected to become the new norm to the benefit of firms such as Econet.
Delta has the potential to regain its throne, as it has always done. The recent opening of bars and bottle stores should see an upsurge in sales volumes and investors will give the counter its correct pricing.
Another interesting mover is National Foods. At the end of September, National Foods was number five in terms of market capitalisation with its value at $46,55 billion.
It has now moved to number three with a valuation of $102,3 billion. This comes as the Group reported significant growth in volumes for the year to June 2021.
Excluding maize, the year-on-year volume growth across all categories was 48 percent. According to the company, this positive outcome was driven by improved consumer demand and a steadily improving market presence across the portfolio.
OK Zimbabwe, which was not among the 10 most valued counters at the end of September has since bulldozed itself into the top 10 with a valuation of $36,6 billion. In yesterday’s trading, the counter leaped $4,07 to $28,47.
The rally in the stock market is driven by three main factors. The first one being the stock market is one of the few options that cash-rich (in local currency terms) institutions and individuals can invest in. Already $2,6 billion has already been invested in the stock market this month alone.
The other available options, such as the money market, are giving negative real returns when the current high inflation level are factored in. The real estate sector though coming out strongly in recent times is long-term and illiquid for most investors.
The second reason is related to the ongoing crackdown on foreign currency traders and transactions. With the foreign currency auction system struggling to meet growing demand, most economic agencies have resorted to the parallel market as a reliable source of foreign currency. This, however, came with challenges, in particular, the rapid depreciation of the Zimbabwe dollar prompting authorities to evoke new and old laws meant to curb illegal foreign currency dealings. The stock exchange has benefited from this with increased daily turnovers averaging $500 million in the last 5 trading days.
The third reason the market is rallying is related to company-specific fundamentals. Listed firms that have been reporting in the last couple of days or weeks showed not only resilience but growth.
Underlying volume growth for businesses is rising dramatically as the economy rebounds. Just to give a few examples at Innscor, the volume numbers showed an average growth rate of at least 30 percent year-on-year. In August, the brickmaker Willdale reported that it had sold 30 percent more bricks since the start of the year.
Fellow construction-related company Turnall reported a 21 percent increase in sales volumes. Simbisa Brands, the country’s biggest fast foods company opened 13 new outlets in Zimbabwe with customer counts growing 8 percent compared to last year.
Companies usually make more sales in the last quarter of the year, which coincides with the festive season. This year promises to be of no difference. Such strong fundamentals make listed stocks inexpensive.