800%. That¡¯s how much the stock market of the African nation of?Zimbabwe?has jumped this year.
In its capital, Harare, which is now home to the world¡¯s biggest stock market rally, the gains come at breakneck speed: 5%, 10%, even 20% in a single session. Tally them up, and the Zimbabwe stock market is up 800%?this year! And this comes amid?inflation in the?African?nation, which soared to 176%?in June.
But in a country where up is often down and the next currency crisis is always just around the corner, the mega rally in stocks is a cause for concern.?Market observers in the country say it's a tell-tale sign that investors are bracing for an inflation spiral and seeking a hedge to protect the value of their money. Consumer prices are climbing at an annual pace of over 100%, sparking jitters in a nation where the scars of hyperinflation run deep, as per a Bloomberg report.
In another desperate attempt to stabilise and strengthen its currency, the country introduced?a gold-backed digital currency in May.
On the other hand, while the?country's stock market may be tiny¡ªthe total capitalization is $1.8 billion, dwarfed by neighbouring South Africa¡¯s $1 trillion-plus stocks¡ªat least it¡¯s a place where locals can easily invest. And, with the Zimbabwe dollar plummeting almost daily, few businesses will accept it as payment on any major purchase¡ªproperty, cars, even fuel.
¡°So all of those Zimbabwe dollars will go into the equities market,¡± said Tatenda Nemaungwe, a stock trader in Harare. Nemaungwe, 36, quit as a personal financial adviser five years ago to manage his own portfolio. ¡°I was riding a dead horse.¡± In an average month, he now earns more than 10 times his old salary of $1,500 thanks to what he calls an ¡°unending bull run.¡±
Zimbabwe stocks have easily outperformed 2023¡¯s other big gainers across the world.?Argentina¡¯s Merval index has merely doubled, while S&P 500 investors must be content with a 16% rally. India's?Sensex and Nifty?have jumped 7% this year to date.
Given Zimbabwe¡¯s economic ills, foreigners have largely abandoned the Zimbabwe?equity market?and account for just 15% of trading. Turnover is a fraction of major exchanges at about $650,000 a day, compared with $240 billion in combined dealings in the Wall Street benchmark, as per the report.
Established in 1894, the?Zimbabwe Exchange is among Africa¡¯s oldest. Its home in the upmarket Harare suburb of Highlands, popular with diplomats and affluent retirees because of its smart residences in leafy and well-maintained streets, contrasts with the raucous bustle of the capital¡¯s downtown. A contrast, too, with the mayhem playing out on its trading board.
That price action has attracted about 23,000 retail investors, including Simba Nyamadzawo, who made his first trade in October using his mobile phone. "I am here for profit," the 35-year-old said. In the country's capital city, Harare, stock pickers have a universe of 55 companies to choose from. The most popular are the blue chips, like drinks maker Delta Corp., telecoms provider Econet Wireless Zimbabwe Ltd., and mobile money group EcoCash Holdings Zimbabwe Ltd.
They are among the exchange¡¯s most liquid stocks, companies that provide products and services Zimbabweans rely upon. That buttresses their sales and earnings, even in times of eye-watering inflation. "Delta is tried and tested," is how Nyamadzawo summed it up.
The country's President Emmerson Mnangagwa is facing off against a fractured opposition field of 10 candidates, and Zimbabwe has a history of disputed votes since white-minority rule ended in 1980. Mnangawa¡¯s government is blamed for much of the economic turmoil that has driven inflation to 176% as of June.??
Even the largest local banknote¡ªthe 100 Zimbabwe dollar¡ªis not enough to pay for a single tomato. The central bank¡¯s main lending rate is the world¡¯s highest, at 150%, as per the Bloomberg report.
For locals in the African nation, there¡¯s a worry that regulators will put an end to the stock-market party. Back in 2020, authorities shut down the exchange for five weeks, complaining that speculation in stocks with overseas listings was undermining the Zimbabwe dollar. Nyamadzawo doesn¡¯t plan to push his luck too far. ¡°If I put my money in today and make a profit tomorrow, I will move it out.¡± It¡¯s hard to predict the future when the economy is so volatile, he says. ¡°I am not sticking around for five years.¡±
Even foreign investors are unlikely to be enticed to the Harare market by the latest rally, according to Hasnain Malik, who covers emerging and frontier markets at Tellimer, a Dubai-based research firm. The gains are ¡°driven entirely by the search for a hedge against inflation and a tradable security for local investors, who have little faith in the local currency and cannot easily access US dollars,¡± he says.
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