THE Zimbabwe Stock Exchange (ZSE) is poised for growth this year despite current challenges, with analysts predicting a steady rise in market capitalisation driven by improving liquidity.
The local bourse experienced a decline of 18% in total market capitalisation in December 2024, underpinned by liquidity challenges among others.
The All-Share Index dropped by 17,9%, driven by significant losses in the Top 15 Index and the Top 10 Index, according to Fincent Securities.
The Medium Cap Index eased -17%, and the Small Cap Index remained unchanged at 100.11. Monthly turnover stood at ZiG225 million, with Delta and Econet as the main contributors.
This was a decline from November's turnover of ZiG287 million, primarily also driven by Delta and Econet.
On the Victoria Falls Stock Exchange (VFEX), market capitalisation gained by 1,84%, and turnover surged by a whopping 459% to US$19,6 million.
Of the losers, Zimre Holdings Limited saw the steepest decline of 70%.
“We expect market capitalisation on the ZSE to rise gradually as liquidity conditions steadily improve,” Fincent Securities noted in its December 2024 report.
“Many significant counters still remain undervalued and are yet to adjust their pricing to reflect true fundamental values.
“Delta and Econet are poised to continue playing a pivotal role in driving liquidity on the local bourse.”
While the ZSE remains the dominant exchange, FBC Securities noted that the bourse's performance was increasingly driven by inflationary trends and local speculative activity rather than fundamental growth.
“Policy consistency and improved forex liquidity could sustain gains in 2025,” the securities firm said in its 2025 economic outlook report.
Positioned as a strategic alternative for firms and investors seeking forex stability, FBC Securities said VFEX had potential for growth if macroeconomic conditions stabilised and international investment inflows improved.
“Overall, policies that boost profit margins and cash flows for formal businesses will increase investable funds available directly to those firms, and indirectly to pension funds,” it noted.
The securities firm said the ZSE recorded an 18% gain in market capitalisation during 2024, driven by inflation-hedging behavior among investors and demand for tangible asset-backed stocks. The benchmark All-Share Index gained 118% to close December 2024 at 217,58 after having been rebased to 100 points in April when ZiG was introduced.
Key sectors such as financial services, consumer staples, and real estate anchored the strong ZSE performance due to their resilience in navigating macroeconomic challenges.
“The ZiG's stabilisation efforts provided some predictability, but periodic currency devaluations created speculative opportunities, boosting short-term trading volumes,” the report reads in part.
“Inflation fears encouraged investment in stocks as a hedge, particularly in sectors less reliant on imports.
In 2024, forex shortages and high transaction costs discouraged foreign investors, who remained largely absent from the market.
“Smaller-cap companies struggled due to weak earnings, tightening regulatory requirements, and constrained growth prospects,” the report noted.
VFEX, FBC Securities highlighted, benefited from companies seeking forex-indexed revenues to hedge against currency risks.
“However, while VFEX attracted additional listings, overall trading volumes remained modest due to limited liquidity and subdued foreign investor activity,” it said.
High country risk perception and limited international capital inflows constrained forex growth potential.
It noted that export-oriented companies and mining firms performed well on the bourse, leveraging global commodity price movements despite local economic headwinds.
The number of trades totaled 12 529 from January to December 2024, with an average of 1 044 per month.
Market capitalisation on VFEX reached a new high in December 2024 of US$1,3 billion, gaining 5,95% compared to the same period last year.
“This increase was mainly due to the addition of new counters and the improved liquidity of the USD,” it said.
Exchange rate as at December 31, 2024 was US$1:ZiG25,8.
