ZSE loses $3bn in three days

HARARE - The Zimbabwe Stock Exchange (ZSE) tumbled last week losing almost $3 billion in three days as the market responds to the military’s seizure of control of government which started on Wednesday.

The Zimbabwe Defence Forces took over control of the government in the early hours of Wednesday in a move meant “to pacify a degenerating political‚ social and economic situation in our country which if not addressed may result in violent conflict”.

The military has consistently stated that its actions do not constitute a military takeover of government, even though President Robert Mugabe has been confined, and several senior officials, including ministers, have been taken into custody.

From Wednesday to Friday last week, the ZSE market capitalisation fell by $2,85 billion, from $15,19 billion at close of business on Tuesday to $12,35 billion by end of day on Friday.

The local bourse’s mainstream industrial index shed 18,99 percent over the three days to settle at 432,72 points while the mining index lost 2,69 percent to close at 134,40 points on Friday.

Heavyweight Delta, lost 36,64 percent over the three days to settle at $2,0375 on Friday.

Telecoms giant shed 28,25 percent to close at $1,34 while Old Mutual lost 19,58 percent over the same period to close at $11,5.   

Leading up to the military intervention last week, the ZSE had been on a bull run since October last year that was driven by inflationary fears and currency issues.

The market’s response since Wednesday is progressive and signals sentiments of expected improvements to the economic situation as the market has been seriously overvalued and devaluation points to normalisation.

This comes as market watchers said any loosening of capital controls and increase in dollar liquidity could see stocks fall further as foreign investors who have been trapped in the country — including Mark Mobius’s Franklin Templeton and JPMorgan Chase — pull out and valuations become more realistic.

“A return to normal conditions may very well lead to the stock market doing badly,” said Neville Mandimika, an analyst in Johannesburg at Rand Merchant Bank.

“The knee-jerk reaction may be initial outflows.”

There could eventually be inflows, especially into agricultural stocks, if investors perceive improvements in Zimbabwe’s long-term outlook, he said.

For now, the ripples in Zimbabwe probably will not  spread far beyond its borders, given how ruined the economy has become after 37 years under Mugabe’s rule.

“Even if the political crisis in Zimbabwe intensifies, the economic implications for the rest of the region are small,” said William Jackson, a senior emerging-market economist at Capital Economics in London.

“The economy is a shadow of its former self. GDP per capita was much higher than the regional average until the 1990s; now it is about 30 percent lower.

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