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ZSE Poised For Continued Growth But Over-Valued In Real Terms

The Zimbabwe Stock Exchange (ZSE) is expected to continue on a growth trajectory this year on strong sentiment as local investors are like to hedge against inflationary pressures that are piling on the economy.

Inflation somewhat slowed down for the greater part of last year owing to interventions by monetary authorities by took-off again last quarter of 2021 to date.

Last year the bourse grew by 314 percent creating heavy returns for local shareholders and closed the year with a market capitalization of ZWL$ 1.317 trillion from ZWL$317.88bn in December 2020.

Speaking at a Confederation of Zimbabwe Industries (CZI) 2022 economic outlook symposium, head of fund management for Imara Asset Management, Shelton Sibanda said with inflation largely lurking, investors are likely to seek shelter in the stock market against rising inflation as the case in the past two years.

“In real terms, the market is fairly valued to over-value. We expect it to be strong in local currency, tracking inflation,” said Sibanda.

“We are likely to see the ZSE receive inflows of local currency from investors as they hedge against inflation and preservation of value of their local earnings.”

The ZWL continues to depreciate against the USD with the disparity between official and parallel market rates widening almost two-fold.

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Despite most foreign investors having sold off their holdings due to the depreciation of the local currency, local investors still realized gains, with the 314 percent growth rate of the ZSE last year well above annual inflation rate of around 60 percent.

Sibanda however said, the investment outlook remains bleak as authorities struggle to bring stability in the exchange rate.

This, he says has led to lack of savings in the local currency especially when government is attempting to enhance wider usage of the Zimbabwe dollar.

Authorities have failed to incentivize savings in local currency with the 10 percent rate on savings and deposits not palatable with annualized inflation rate of over 60 percent.

“This is creating negative real interest rates which cannot boost savings in local currency,” said Sibanda.

On the USD-quoted Victoria Falls Stock Exchange (VFEX), Sibanda said external factors such as the record hitting interest rate hikes of nearly 40 percent in the US may as well affect capital inflows.

Government introduced the VFEX over a year ago with the hope of raising US$ 100 million for the local economy

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