The Zimbabwe Stock Exchange yesterday capped its biggest annual advance in a decade after a tumultuous year, with gains aided by the local dollar’s decline, high inflation levels, and undervalued stocks.
By the close of trading for the year 2020, the ZSE All Share Index was up 1 045.84 percent to 2 636.34, an all-time high.
The Top 10 Index was the least performer, up 724.68 percent to 1 671.47, a record high.
The Medium Cap Index, was the best performer, up 1 808.02 percent to 5 491.09, its highest level ever.
In terms of value, the ZSE’s market capitalisation closed the year up 968 percent, at $317,9 billion up from $29 billion at the close in 2019.
This means the equities market, which was valued at US$1.77 billion using official exchange rate of 16.77 at the end of 2019 closed the year up 115.5 percent to US$3.88 billion using the current official exchange rate of 81.78.
In percentage terms, the 968 percent gain is the highest for the decade.
Before this, the biggest annual market capitalisation advance was 104 percent recorded in 2018.
Some analysts however, argue the 2017 and 2018 valuations have to be discounted as the period was characterised by currency distortions which saw the market assume values that were not a true reflection of true US dollar values.
During this period, authorities maintained the exchange rate between the US dollar and the Zimbabwe dollar at 1:1 while the parallel market had its own valuations that were at a premium in favour of the green back.
Some market watchers are also valuing the 2020 market capitalisation using parallel market rates.
This values the market at US$2.7 billion. Compared to 2019’s valuation of US$1,17 billion, using parallel market rates, the ZSE’s 2020 performance, up 131 percent, is still the best for the decade.
CBZ was the top performer for the year. It gained 12 093.4 percent to close the year at $85. The gains helped the financial services group overtake Delta as the most valued company on the ZSE. Its market capitalisation reached $58.4 billion. This rally comes in a year that started with Board Chairman Mark Holtzman saying the financial services group was to embark on an internal transformation that will allow it “to succeed in a way that has never been conceived before”. Although Holtzman might have been referring to operational and profitability successes, the share price performance has certainly enhanced shareholder value.
Masimba came a distant second, but punched above other bigger companies to close the year with a 6 533 percent gain. Cafca, Hippo and Art completed the top five risers with gains of 4 950 percent, 4 525 percent and 3 291 percent respectively.
No counter closed the year in red in nominal local dollar terms although gains recorded by some, where below inflation and certainly suffered from currency depreciation.
One such counter is GetBucks. The microfinance company had gained just 4.2 percent at the close of the year’s trading.
The market was however not without its challenges. In June it was ordered to halt trading amid allegations some market players were fuelling foreign currency instability through the use of dual listed Old Mutual. The counter was used to calculate the Old Mutual Implied Rate (OMIR). The OMIR was used by illegal foreign market dealers to determine the exchange rate between the Zimbabwe dollar and the US dollar. While the official exchange rate was pegged at 25, the OMIR and the parallel market exchange rate had raced to 120. This pushed inflation to a record 837 percent since 2010. The OMIR was thus blamed for both price and exchange rate instability. The ZSE was closed from June 26 to August 3.
When it was finally opened, investors sold off shares. Market capitalisation fell from $228 billion to $158 billion in less than a month. Although the market has since recovered to record levels, shareholders in PPC Limited and Old Mutual have not benefited from the current rally. The two companies remained suspended. Without a home.
Foreign investors opted out
The year was also one in which foreign investors opted out. They closed the year as net sellers of $6 billion worth of shares. After going through years of frustration, in which they could not repatriate dividends and disinvestments, foreign investors took advantage of the foreign currency auction system introduced in June which has given an avenue to repatriate disinvestments.