The Zimbabwe Stock Exchange recorded its biggest monthly turnover since dollarisation after the October 2017 turnover breached the monthly record turnover achieved in September 2017.
Turnover for the month of October amounted to $168,8 million. The previous highest was $89,8 million recorded in September 2017 and before that, the highest monthly turnover was recorded in August 2014 when turnover amounted to $66,4 million.
The October turnover, takes the year to date turnover to $412 million, the highest first 10 months of the year turnover since dollarization. Before this, the highest January to October turnover was achieved in 2013 when it clocked $401,5 million. Unlike 2013 when investors were backing company fundamentals, the current interest in stocks is being driven by currency fears.
The uptick on the ZSE, and the amount of money being invested, speaks to the macro-fundamentals on the ground where loss of confidence in the banking sector and low money market returns has left the stock market as the preferred destination for investment.
Bank balances have been losing value over the years amid cash shortages both locally and in nostro accounts. The gap between actual cash and RTGS balances continues to widen putting pressure on the value of money.
The gap in value between hard cash and bank balances is now pronounced in both the price of money and that of goods and services. For one to get hard cash, one now has to pay a premium upwards of 35 percent on the illegal market. Further to that, prices for both goods and services now have different tiers with electronic payments attracting huge premiums while payments using US dollars are attracting discounts of at least 20 percent.
It is against this background that investors, individuals and corporates with huge cash piles have turned to the stock market as a way of preserving value in real assets. It is also important to note that elsewhere on the globe, stock markets investments are not necessarily considered safe but risky assets.
In developed economies the situation prevailing in the economy would have seen investors dumping both money market and stock market investments and seek refuge in gold and cash. In Europe for example any turbulence or geopolitical tension will see investors selling off stocks and buying into gold or keeping cash. Even on the JSE, negative pressure on the rand normally results in people selling off stocks, but this has not been the case in Zimbabwe where currency uncertainties are pushing investors towards the stock market.
The property market has been another option for investors although there is little detail as to how much is being invested.
Offshore investments could have been a preferred option but locals would have to seek permission from the RBZ, but chances are highly unlikely that permission would be granted given the forex challenges.
Some investors are however using Old Mutual as a conduit to take money outside the country. On the ZSE, Old Mutual at $14,30, is currently trading at a 458 percent premium to its LSE as investors look for shares for removal from the Zimbabwean register. By end of September more than 1,5 million Old Mutual shares had been removed from the Zimbabwean register.
The arbitrage opportunity has however attracted investors from outside the country who, instead of bringing in US dollars for whatever purpose are choosing to bring in Old Mutual shares and enjoy the huge premium. For such investors, even if they were to buy cash on the illegal market, the premium earned on the ZSE is much higher than the premium being charged by cash dealers.
By the close of trading in October, the ZSE’s main Industrials Index was up by 24,73 percent to 521,85 while the mining index was up by 8,09 percent to 132,49. Most listed stocks supported the market’s rally with the exception of RTG which still has a year-to-date loss of 22,5 percent.