LIVINGSTONE MARUFU
The Zimbabwe Stock Exchange (ZSE) gained ZWL$5.26 trillion in May to ZWL$8.28 trillion from the April figures, fuelled by excess liquidity in the market and high inflation, Business Times can report.
The surge from ZWL$3.48 trillion in April comes as investment analysts expect the bullish sentiments to continue due to inflationary pressures.
They said high inflation was pushing equity prices upwards as investors want to hedge against loss of value.
Zimbabwe’s annual consumer price inflation rose to 86.5% in May 2023, up from 75.2% in April.
“The stock market usually rerates in line with the inflation and the exchange rate as we have seen in the past few weeks the depreciation of the ZWL$ against the major currencies,” said Batanai Matsika, insights and research director at Marks & Associates.
He added: “There is also an indication of excess liquidity in the market over the past months hence with the increase in money supply growth the stock market tends to react in line with the amount of money in the economy.”
Analysts say the bull run is characterised by optimism and investor confidence but in this case, the bourse is reacting to money supply growth in the economy.
“The country has been experiencing high inflation and the market capitalisation has been on a constant upward movement as most investors move to offload the local currency by buying shares.
“We continue to witness the vicious cycle of high inflation therefore the investors want stocks to hedge (against) inflation,” a stockbroker who preferred anonymity told Business Times.
Matsika expects the ZSE market capitalisation to continue on the bull run this year as inflation continues to ravage the economy.
“The bourse will be the most feasible option to preserve value on Zimbabwean capital markets as cash and money market instruments are not the best options given that there is a higher expectation of deterioration in inflation fundamentals,” he said.
Analysts said the financial services sector remained attractive and foresees potential upswings and corrections in the market.
Also, the consumer sector remains an interesting division given the defensive nature of food.
Morgan & Co recently said the real estate or property sector remains predominantly a US$ asset in Zimbabwe and presents liquidity constraints for medium-term investors.
Multiple stockbrokers anticipate a general bullish sentiment to prevail on the stock market and investors are urged to consider companies with diverse business models, inflation-hedging capabilities, and foreign currency generation capacity, in the counter-selection process.
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