As the local unit (ZWL) battles immense fragility, Zimdollar denominated asset classes have succumbed to the volatility, and this has seen some investors losing out more than half the value of their investments in real terms (US$ terms in this context). However, some Zimbabwe Stock Exchange (ZSE) listed companies have resisted the exchange loss and are sailing in positive territory in real terms, thus offering more than just ‘value preservation’ to investors.
To give background, the ZSE boasted of a 112% year-to-date return in US$ terms by mid of May this year. However, following a combination of measures from the Ministry of Finance and the Central Bank, aimed at stabilizing the exchange rate and curtailing inflation, the ZWL took a nose-dive, dipping -59% and -55% against the US$ in May and June respectively before finally “stabilizing” as intended. This led to a significant revaluation loss on ZWL denominated assets as they failed to catch up with the rapid and rampant exchange loss.
As of the 17 th of July, 2023, the mainstream ZSE All Share Index had succumbed to a loss of -7.3% since the beginning of the year, in US$ terms, down from a positive return of 112% in May. In nominal terms, however, the ZSE is up 562%.
Despite boasting of positive nominal gains, a total of 22 counters on the ZSE have succumbed to exchange rate loss and are sailing in red. National Tyre Services (NTS) is the worst performing in real terms, with a year-to-date loss of -75%, while closely trailed by GetBucks and Bridgefort Capital Limited at -72% and -70% respectively. In nominal terms, NTS boasts of a ZWL year-to-date return of 81% while GetBucks and Bridgefort Capital Limited flaunt gains of 101% and 114% respectively.
Meanwhile, other counters that have been inactive throughout the year have also not been spared by macro-economic challenges, and these include ZECO which has not recorded any price movement in the year and yet has succumbed to a loss of value of -86% in US$ terms. This is in line with the year-to-date depreciation of the ZWL which stands at -86%.
On the upside, an aggregate of 20 stocks are still sailing in positive territory on a year-to-date basis in US$ terms. This is despite the overall negative trajectory of the market. SeedCo currently boasts as the top performing stock on ZSE and in the region, with a year-to-date return of 238% in US$ terms. The duo of FBCH and ZHL closely rally behind SeedCo with year-to-date returns of 196% and 137%.
Meanwhile, Malawi Stock Exchange is currently the best performing bourse in Africa, with a US$ year-to-date overall growth of 75% which is however, below the performance of the Top 10 best YTD performing counters on ZSE. The 10 th best performing ticker on ZSE on a YTD basis, Hippo, boasts of a US$ return of 77%. Ariston is the 20 th best performing counter out of the 20 stocks in positive YTD position on ZSE, and boasts of a 4% surge which is ahead of the average stock market YTD returns from 11 countries.
On a sectoral basis, the Consumer Discretionary and the Industrials sectors have emerged the best performing on a YTD basis, with average returns of 75% and 55% respectively. On the downside, the Materials and the ICT sectors are the worst performing, with losses of -28% and - 27% apiece. The real estate, financials and agricultural sectors are also among the top performing. It is, therefore, clear that sectors with high turnover rates have succumbed to exchange losses while sectors with relatively slow-moving products have outpaced inflation.
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This could be a result of the ability of the latter to forward-price and manage currency-mix on revenue, which then reflect on the Income Statement and thus attract investor-confidence.
- 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_