ZIMBABWE: Bulls rampage at Zimbabwe bourse as economy sinks

Zimbabwe's economy is in free-fall and the International Monetary Fund predicts an interest rate close to 4,000 percent by year-end. The country's stock market is one place where Zimbabweans are still making money - lots of it. Zimbabwe's economic woes have been headline news across Africa and beyond, for the past several years. But despite an economic decline that has seen hyper-inflation of above 1000 percent and people struggling to deal with large amounts of devalued currency, there is one place in the capital Harare, where money is being made hand over fist: the Zimbabwe Stock Exchange or ZSE. In between scribbling, shuffling small pieces of paper and tapping calculators, the brokers yell loudly, clamouring for attention. It's another busy day at the exchange. The bull run here is an odd side effect of an economic crisis that has led to unemployment of over 80 percent and soaring poverty levels. The crisis has been widely blamed on President Robert Mugabe's government, but it denies responsibility and says it is a victim of a Western sabotage campaign over a controversial and sometimes violent land reform programme. Patrick Saziwa, an analyst with Kingdom Stockbrokers says the stock market is one place where investors can take shelter for the country's economic woes. "I think the stock market has sort of outperformed general expectations and we've actually seen the industrial index and the mining index board actually attaining all time highs and giving real returns. I think to some extent the stock market has been on an upward trend firstly because of the negative returns that investors get in the other alternative markets. In the money markets the returns there are negative, when one looks at the return compared with inflation and there's an absence of an active bond market and other sorts of investments so most investors would then sort of flock to the stock market and that huge demand for shares would then push up the stock market," he said. Reserve Bank of Zimbabwe Governor Gideon Gono has said the ZSE has become a haven for speculators, where "dirty" money from illegal foreign currency trading is used. But Saziwa warns that speculators, while sometimes pushing up prices, have generally been squeezed out by corrections. "In the short term, yes, speculators might drive up share prices but over time yes, there will be a correction." The Africa Stock Exchanges Association (ASEA) said the ZSE was among the bourses that offered investors some of the highest returns in Africa in 2005 and 2006. ASEA statistics showing the ZSE recorded a 1,545 percent rise in 2005 and shot up by more than 2,000 percent between January and the first week of November, 2006. The ZSE has a market capitalisation of around $20 billion, with 9.6 million shares valued at $760 million traded in 2005. Compared to Johannesburg's JSE Securities Exchange, which had a market value of 3.5 trillion rand ($489.2 billion) at the end of 2005, this is tiny. But Zimbabwean investors say their exchange is one of the few places in the country to get good investment returns. "Inflation is at an average of more than a thousand percent. We have negative interest rates at the moment. The exchanges really capitalise on the macroeconomic distortions. Investors, the only place they can see where they can get perhaps good returns is the stock market," ZSE Chief Executive Emmanuel Munyukwi told Reuters. Shares on the exchange can rise by more than 50 percent in a week, something not lost on investors scouting for opportunities to hedge against inflation. Heavily capitalised stocks like Old Mutual Zimbabwe, Pretoria Portland Cement, hotel group Meikles Africa and mobile phone firm Econet Wireless have largely driven activity at the stock market. The majority of Zimbabwe's 12 million people have not benefited from the stock rally. Analysts say some 90 percent of shares on the 80-company bourse are held by large corporates, largely because stockbroking firms require a minimum of 100,000 Zimbabwe dollars ($400) from investors -- more than twice the monthly earnings of an average Zimbabwean.

ITN Source | March 16, 2007

Tags:. .controversial. .perhaps. .twice. .portland. .industrial