HARARE (Bloomberg) – Zimbabwe's stock market is in the special category for extreme cases. Executive Officer Justin Bgoni: a local currency that has crashed more than 80% since a peg to the US The dollar was ended in February and annual inflation at the International Monetary Fund is estimated at 300%.
While Harare's Industrial Index is at a record high and market capitalization in local currency terms has surged 169% from a year ago to Z $ 31
“Our market capitalization in the U.S. dollar terms – almost just been worse, we are almost half of what we are normally at, ”Bgoni, in a job since March, said in an interview at his office in the capital, Harare. “If it was a normal country, where things were not indexed in the U.S.S. dollars, things seem so bad. ”
When it comes to assessing individual stocks, hyperinflation skews the picture for traders, said Lloyd Mlotshwa, head of equities at IH Securities, and Harare-based brokerage. While companies are showing significant gains in revenue, actual volumes of products are sold down and overall performance is deteriorating.
“The massive currency devaluation has also caused dislocation in stock market valuations,” said Mlotshwa. “Some firms are trading below the replacement values of their plants. At the same time, sentiment is so negative that this is necessarily necessarily being interpreted as a buy signal. ”
In February, the 1: 1 parity peg between so-called bond notes and the U.S dollar was removed. In June, Finance Minister Mthuli Ncube abolished the use of the multicurrency system and reintroduced the Zimbabwe dollar as the sole legal tender, almost a decade after it went out of circulation because of hyperinflation. The Zimbabwe dollar on Friday was trading at 15.85 per US dollar, compared to the February rate of 2.5 adopted at the end of parity.
Economic conditions in Zimbabwe, its struggling companies and inconsistent government policies all make local stocks less attractive to foreigners , Bgoni said. In terms of market development and investor options, he estimated the bourse trailed African peers in Botswana, Kenya and Nigeria by about 10 years.
“We are really down on foreign investors and we almost have no new money coming in,” he said.
Foreigners accounted for 15% of trades in October, the lowest in three years, and down from the record 82% in February this year.
“We want foreign investors, especially when you have a devaluation of this sort, because they would be able to see bargains and bring up the prices, ”Bgoni said. "But then, they can't take their money out," due to foreign exchange controls and other Treasury regulations, he added.
– Ray Ndlovu with assistance from Ana Monteiro.