THE Zimbabwe Stock Exchange (ZSE) has surpassed the aggregate turnover recorded in October, half-way into November while the return on investment is trailing closer to October levels, and is set to record yet another commendable performance in real terms.
This comes as the Reserve Bank of Zimbabwe (RBZ) alludes that it continues to suppress Zimbabwe dollar (ZWL) supply in the economy to curb inflation and exchange rate losses, and, therefore, the development on ZSE provokes an examination.
As at end of trading day on November 17 2023, a total of ZW$41,6 billion had exchanged hands on ZSE, 31% up from ZW$31,8 billion traded in the entire month of October.
An average of ZW$1,44 billion exchanged hands on ZSE on a daily basis in October, and this has grown one-fold to ZW$3,2 billion per day in November.
Meanwhile, the number of shares traded thus far in November has doubled from the volumes traded in October.
On the other hand, the top five turnover drivers in November contributed 90% of the aggregate revenue at ZW$37,6 billion, while the top five turnover drivers in October contributed 78% at ZW$24,7 billion.
Meanwhile, the mainstream ZSE All Share Index is up 12,93% since the beginning of the month in nominal terms, and 12% in United States dollar (USD) terms as the ZWL holds ground against the USD amid liquidity tightening. In October, the ZSE garnered a growth of 24% in nominal terms, and 19% in USD terms.
The sharp increase in turnover in November is attributed to hedge-seeking ahead of the festive season.
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The ZWL, despite a marginal depreciation of -1% in November, is inherently highly fragile and prone to internal and external shocks in other economic fundamentals.
The month of December, particularly the festive season, tends to bring about a shift in overall spend and the currency mix. The shift is, however, unpredictable, which leads to safe-haven seeking for ZWL holders.
Investors seeking value preservation tend to increase exposure in market heavyweights, which explains the dominance of top 10 caps on top value drivers, rising to a contribution of 90% of the aggregate turnover against October levels.
This is also indicated by a 10% surge in the ZSE Top 10 Index, ahead of a mild 5% growth in ZSE Small Cap Index.
Notably, Econet remained the second turnover driver in October and November, increasing the magnitude in November.
This followed the successful capital raise on redemption of debentures, which extinguishes exchange losses on foreign obligations as recorded prior, and thus leaves more profits attributable to equity holders.
Meanwhile, Delta also remained in the top three turnover drivers in both months, despite a reduction in magnitude as the group fails to reach its pre-dedollarisation financial performance levels.
However, on the other hand, penny stocks seem to be gaining momentum comparative to prior month levels as currency stability brings hopes of value preservation across the market. The one-fold increase in total shares traded against a 30% surge in turnover is reflective of increased activity in low-value stocks. The performance of ZSE in real terms in November is to a greater extent attributable to currency dynamics. Exchange rate stability has stimulated investor-morale to increase participation across sectors on the bourse, and, therefore, the trend will likely continue in-line with exchange movement.
An anticipated increase in remittances in December will likely off-set an increased ZWL liquidity as government contractors and bonuses get paid. However, the short-term shock will reflect on the market.
The foreign currency exchange rate as at November 17 2023 was US$1:ZW$5 758,53 and as at October 31 it was US$1:ZW$5 698,96
- Duma is a financial analyst and accountant at Equity Axis, a leading media and financial research firm in Zimbabwe. — [email protected] or [email protected], Twitter: TWDuma_
