Stock market goes boom, economy goes bust

Zimbabwe's stock market could experience a mini boom, but for all the wrong reasons, analysts told IRIN.

Harare's Financial Gazette reported speculation that the Zimbabwe Stock Exchange (ZSE) would experience "a mini bull-run in the coming month as edgy investors move back into equities [shares] after jittery trading in the first four months of the year".

Market analyst George Glynos, of Standard and Poor's Money Market Service in Johannesburg, said a bull-run occurred when the investing community started to buy back into the stock market creating an "upward thrust in share prices".

Independent market analyst Raymond Brand told IRIN the ZSE's "mini boom" was being fed by local investors with precious few investment options.

He said: "There are a number of reasons for the investment in shares, one of which is there's little else to invest in. People or companies who have spare cash, have nowhere to put it. That has led to a mini boom on the exchange, even though the country appears to be going downhill fast. It's mostly Zimbabwean investors, with the uncertainties around the exchange rate, it's not really a market foreigners want to invest in.

"It also looks as though the government may depreciate the Zimbabwe dollar in the near future. On the grey market the exchange rate is about ZW $300 to one US dollar, whereas the official rate of exchange is ZW $55 to US $1. Foreigners do not want that kind of currency depreciation risk," he added.

He said the shortage of foreign exchange in the country forced Zimbabwean investors to put their money in the ZSE.

The Financial Gazette reported that "the main industrial index on the ZSE last week breached the 50,000 point psychological barrier for the first time since September 7 2001, leaving most analysts speculating that the ZSE is headed for a mini bull-run".

However, Brand pointed out, this was almost a no-win situation. With the ZSE being the only place to put money investors who held stock were not selling because they could not take their money out of the country.

"At the moment [investors] will take anything that's going, but there are no sellers because where do the sellers then put their money. It's almost impossible to get money out of the country, unless you can buy foreign currency on the grey market at exorbitant premiums. With inflation being the way it is you do not want to invest in fixed interest securities either," he said.