2017: What a year!

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Mamvura’s Market Minute
If anyone tells you they knew what was going to happen this year, they are utter liars. This year was unpredictable, largely because of Operation Restore Legacy, and what would have happened if the “military arbitration” had not taken place.

Would the Industrials index have ended the year at 700 having risen 500 percent in the year?

It was certainly going that way. Even with only two sessions left in the year, the ZSE is still not reflective of its true value on a 1:1 basis, nor is this the case even if we were discounting it by the transfer rate.

What a year! As Mamvura suggested back in Mbudzi, there are two ways to get back to that “record” made on the back of perceptions that the government of the day was NOT doing the right thing.

The first is the same old policies that will result in monetary expansion and the second is meaningful foreign investment in the ZSE.

It’s probably likely that we end with a bit of both, but who would be calling where the market will be by the end of 2018? An exchange rate more reflective of value in this economy will actually see the real dollar value of this market fall back.

There are two major issues that need to be solved sooner rather than later — the backlog on external payments, and partially caused by that, the rise in prices.

It will be interesting to see how far the nostro stabilisation goes towards fixing this issue, but the smart money is on it being not big enough to fill the gap caused by the mismatch between RTGS balances and the external position.

The parallel market exchange rate tells us that, and as he has already suggested, the IMF will demand that the exchange rate reflect demand and supply fundamentals before they chip in anything.

So where will we be in Christmas 2018?

Up, down or sideways?

I’m not even going to hazard a guess.

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