Bulls raging on the ZSE: Is it 2013 all over?

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Activity on the Zimbabwe Stock Exchange was much improved in the month of May with more than $60,2 million worth of shares having been traded. This was the second highest turnover for the bourse this year and puts the year-to-date turnover at $249,8 million, which compares favourably to the $75 million that was invested in the comparative period the prior year.

The year-to-date turnover, up to May, is the highest first five months turnover since dollarisation an indication that more funds are looking for a home with the equities market the favoured destination.

Cash rich institutions and individuals seem to have turned to the equities market as a hedge strategy and some as a result of limited investment options in the country.

Some analysts also associate the market rage with the pre-election mode with the market having also rallied around the 2013 harmonised election period.

The upward trend also continued, with the main Industrials Index closing at 361,53, the highest in 6 months and the third monthly closing high since dollarisation.

The Mining Index at 151,53 points is however at its 7-year high having last traded at these levels in 2011.

Foreign purchases though not the highest so far in the year were healthy at $23,9 million. With foreign sales at $10,2 million it means foreign portfolio investors were net buyers for the sixth consecutive month, a complete reversal from the previous months where they were net sellers for 11 out of 12 months in 2017. Overall, foreign buyers have been net buyers, since the beginning of the year, by at least $45,2 million.

The currency concerns, where the US dollar is trading at a 60 percent premium to RTGS balances has meant that most analysts and investors have been discounting the market by an almost similar percentage. The argument is that if the equities market positions are liquidated, the RTGS proceeds will not be matched by real US dollars.

POSB chief executive officer Admore Kandlela, in his presentation at the bank’s annual general meeting this week, shared similar sentiments, telling shareholders that players in the country’s banking sector though adequately capitalized, the huge bank balances were not matched by hard currency or nostros for purposes of meeting international obligations or cash withdrawals.

Market capitalisation for the bourse at $10,4 billion, closed the month at its six month high having last traded above the $10 billion mark in November 2017.

In 2013, the ZSE’s market capitalisation was $5,5 billion and if we are to discount the current market capitalisation by the currency distortions, as some have suggested, the market cap will come back to levels similar to those in 2013.

If we are to discount the currency risk by say 40 percent, the main Industrials Index which closed the month of May at 361,53 will come down to 216,98 a level which is pretty much closer to the trading levels around the election period in 2013.

Is it 2013 all over?
The year 2013 is often seen as a benchmark, a year that the market was probably trading without many distortions except the then pending elections.

The country’s GDP was also growing at an estimated 5,3 percent and interestingly Finance and Economic Planning Minister Patrick Chinamasa has since said Zimbabwe’s economy could grow by up to 6 percent this year, more than the initial forecast of 4,5 percent, due to the reforms being pursued.

In terms of individual company performance, the country’s biggest beverages company, Delta Corporations also recorded all-time high volumes during 2013. Lager beer volumes for Delta reached an all-time highs of 2 060 000 litres in 2013 before tapering in the years that followed.

Volumes have, however, turned the corner and are now showing strong signs of growth as depicted in the graph.

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