By OMEGA UKAMA in Harare

THE Zimbabwe Stock Exchange (ZSE) gained $90,72 billion in May as the benchmark All Share Index (ASI) put on 17 percent to close the month with year-to-date gains of 105 percent.

Market capitalisation grew by 15 percent to $646 billion, and the ASI closed at 5 428,28 points.

The spike came as a shock after a slowdown that started in February, which saw monthly gains shrinking from 19 percent to 3,5 percent in April amid indications and growing sentiment that the market was getting back to “normalcy”.

“The recent rally on the ZSE can be mainly attributed to parallel market developments and increased retail participation,” local equities analyst, Enock Rukarwa told business weekly The Financial Gazette this week.

“Parallel market rates have rallied steeply in the period under review resulting in a widening parity between the official and unofficial rate, now around 40 percent.”

On the official market, however, the ZWL has held steady against the US$ for close to six months and inflation has declined from 836 percent in July 2020 to 162 percent last month, with the reserve bank’s weekly foreign currency auctions introduced last June being credited for this stability.

“Average daily trades also increased owing to rising retail participation on the bourse. The number of trades is now averaging around 500 as compared to historical averages of 300 daily trades,” Rukarwa said.  

On its part, the ZSE has said the introduction of ZSE Direct and C-Trade ― web-based mobile platforms that allow remote trading in securities ― has boosted retail investor participation on the exchange.

Another equities analyst, Ranga Makwata, says the renewed demand for stocks has been driven by shifts in some fundamentals, but warned valuations are now too high.

“With the way the market has moved there is a lot of conversation around whether the ZSE is overvalued and there is merit in this discussion if you consider that the market had been hovering around the US$3 billion and US$3,5 billion by way of capitalisation, and now we suddenly find ourselves with such a high valuation,” he said during a recent webcast.  

The market’s slowdown and the currency “stability”, had led some analysts to believe that activity on the local bourse was now beginning to track fundamentals of companies rather than macro-economic developments, as has been the case in the past few years.

Meanwhile, the ZSE ASI’s intra-month peak was 5 596 points, its highest level since introduction in 2018.
The Old Mutual ZSE Top 10 Exchange Traded Fund gained 13 percent to $1,99 during the month, while the heavies’ index it tracks put on 11 percent to end at 3005,08 points. – The Financial Gazette