eBusiness Weekly
Kudzanai Sharara-Taking Stock
Today is the last day of trading on the Zimbabwe Stock Exchange (ZSE) for the 2021 calendar year. What a fruitful year it has been for stock market investors.
Although there is still one more trading session to go, most stock market investors who invested on the ZSE same time last year, are in the money.
Returns on the ZSE this year, have not only beaten inflation, which closed the year sitting at 60,7 percent, but has also beat currency depreciation.
A year-to-date gain of 315 percent as of yesterday compares favourably to the inflation outturn.
On the parallel market, the Zimbabwe dollar lost approximately 50 percent of its value against the US dollar this year. Gains on the ZSE compensated for this, plus more. It means ZSE investors did not only hedge against currency depreciation, but also made significant capital gains.
By the close of trading yesterday, the ZSE was valued at $1,3 trillion compared to a value of $317 879 307 047 at the close of trading last year.
Using the official exchange rate of $108 for every US$1, the market was valued at US$12 billion yesterday. It’s unlikely to change much in today’s trading session.
Using the parallel market rate of $200 to every US$1, the market cap would be US$6,6 billion.
It means overall, on average, stock market investors earned a combined US$3,5 billion.
This is not to say there were no losses made by investors, far from it. Some who held on till now failed to beat both inflation and exchange rate depreciation.
Investors in CBZ, ZHL, Cafca, FBC, FML, and a few others are singing the blues. Investors in CBZ are worse off as the counter even closed in the negative territory. Others lost by buying high and selling low as they tried to time the market, follow the crowd, or panic sold.
Throughout the year, the market had its highs and lows, but investors can only lose money during such volatility if they sell their positions at lows, instead of waiting it out for the market to rise. It is important to remember that the market is cyclical and stocks going down are inevitable. But a downturn is temporary. It is wiser to think long-term instead of panic selling when stock prices are at their lows.
The winners
Unifreight is the year’s top performer with a gain of more than 16 000 percent as of yesterday. Because the counter is not that liquid, few investors managed to buy its shares this year. The biggest winners, if they were to sell at current price of 3 000 cents would be the long-term shareholders who had the shares at the start of the year. For now, the gains are unrealised.
CFI, which returned from suspension in October this year, is the second-best performer, up more than 12 600 percent. The counter was, however, playing catch up as it had not traded since 2018.
Trading in the securities of CFI was suspended on January 2, 2018 for failure to comply with the free float requirements and some corporate governance-related matters under the ZSE Listing Requirements.
Getbucks, NTS and National Foods completed the top five risers with year-to-date gains of more than 2,000 percent each.
The market’s top counters by valuation all recorded gains above the overall market’s average. National Foods, which sits at number five in terms of market capitalisation led with a 2 146,3 percent gain.
Econet, which is the market’s most valued counter rallied 795, 9 percent while Delta put on 587,2 percent. Cassava Smartech (Now Ecocash Holdings) added 508,6 percent. Innscor was the least riser among the top five counters after it gained 332 percent since the begging of the year.
Old Mutual Top 10 ETF
The bourse also saw the introduction of an exchange-traded fund on the first day of trading this year. The Old Mutual ZSE Top 10 ETF has since gained 416,32 percent after listing at a price of $1 per unit. This is above the overall market’s gain of 315 percent gain.
Market drivers
At the start of the year, the ZSE with a market cap of US$3,1 billion looked undervalued and provided potential headroom for investors. As the year progressed, excess liquidity became the major driver of share prices. Some investors sought to hedge their local dollar earnings from inflation and currency depreciation with turnover breaching the $50 billion mark. This is much higher than the $17 billion invested last year.
It was a case of too much money chasing a few goods. The same phenomenon manifested in the exchange rate as well, with the local dollar losing 50 percent of its value throughout the year. This further fuelled demand for shares leading to a sterling performance by the market.
Increased money supply and a depreciating local dollar meant inflation remained high forcing investors to again turn to the stock market as a hedge. Listed stocks also grew beyond recovery in terms of volumes growth, although the actual earnings could have suffered from inflation and currency depreciation.
Outlook
Going into 2022, the above themes or is it risks are likely to persist. Inflation and exchange rate depreciation remain a major threat to the value of the Zimbabwe dollar. Investors care about inflation because it influences many aspects of the return and risk paradigm. With limited investment option, the stock market could remain in favour for investors as it has potential for a growth lift.
