Zimbabwe: ZSE Market Capitalisation Reaches US$2,03 Billion
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The Herald (Harare)
16 July 2008
Posted to the web 16 July 2008
Harare
THE Zimbabwe Stock Exchange market capitalisation using a fair value exchange rate is almost half of last year's close of US$5,44 billion.
The stock market has however lagged behind while every other asset price for instance commodities and the foreign exchange rate has moved in line with inflation.
Based on Monday's prices the ZSE market capitalisation was at US$2,03 billion while its highest peak was US$10 billion just before the fall in 1997.
The indices closed last year with gains in excess of 300 000 percent ahead of the national inflation figures of 66 191,5 percent and made returns in US dollars of 62 percent.
Lusaka Stock Exchange was however ranked as the best performing market in terms of returns at 102 percent (first half: 97 percent) with a market value of $4,82 billion.
However, at current measuring the stock market value is difficult because the rate at which the currency is depreciating varies depending on the exchange rate used. At the start of the week, the fair value (transfer) rate was at $250 billion while the Old Mutual Implied rate was at $205 billion to the US dollar
Since the beginning of 2007 equities have mirrored asset price inflation and excess liquidity in the money market ignoring other fundamentals as investors seek to hedge against inflation
Money supply grew 51 000 percent last year compared to 1 000 percent in the year 2006. Inflation closed just above 66 000 percent in 2007, at 1 281 percent in 2006 and at 585 percent in 2005.
If fundamentals are to be followed resource and commodity counters should be priced at par with what is happening globally. For instance mining counter RioZim at Monday's price of $700 billion (US$2,80) should be valued along the same levels as DeBeers.
Counters such as Afdis have registered growths in US dollar capitalisation while others such as CAPS have lost value. In 1995 Afdis had a market capitalisation of $6,8 million which rose to $16 million in the first quarter of this year. CAPS on the other hand was $10 million in 1995 to $3 million in Q1 2008
Sentiment turned negative last week in anticipation of the mid-term Monetary Policy Statement however any issues that the policy will cover are likely to be expansionary (a positive for the stock market) rather than contractional.
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This should set the pace for a rally on shares while at the same time fresh injections of money owing to the start of the phase 4 of the Government's Farm Mechanisation programme and the rolling out of Peoples' Shops has made the money market highly liquid.
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