Bloomberg
Zimbabwe’s dollar-only stock exchange, created in 2020 amid a currency crisis, is fast closing in on the 131-year-old main bourse’s mantle as the southern African nation’s main trading platform.
The 17 companies listed on the Victoria Falls Stock Exchange had a combined market value of $1.9 billion on Tuesday, compared with $2.6 billion for the 49 stocks trading in the local ZiG currency on the Zimbabwe Stock Exchange.
The gap between the two exchanges is “substantial” but could narrow quickly in the event of a “currency event” that impacts on company valuations or if a large firm migrates to the new bourse, according to Lloyd Mlotshwa, head of research at IH Securities.
“If we are looking at purely organic growth,” the total value of shares on the VFEX could exceed those on the ZSE within the next 24 months, he said.
Trade in blue-chips, including Delta Corp and Econet Wireless Zimbabwe, is still anchored on the local-currency exchange.
The two firms, which make up 54% of the ZSE’s total market value, may face pressure to migrate to VFEX to better protect shareholder returns, Imara Asset Management Chief Executive Officer Shelton Sibanda said.
“The economy is dollarised with pension funds doing more trading on the VFEX,” he said in an interview.
The VFEX has posted broad gains this year, mirroring rallies across emerging markets on the back of firm commodity prices, a steadier local currency, and renewed confidence, IH Securities said. That contrasts with the ZSE – long a haven for investors during bouts of high inflation – which is slightly lower.
“The VFEX has been the standout performer, with market capitalisation rising over 40% year to date,” the Harare-based brokerage said in its latest equity report, attributing the strong performance to gold-linked and consumer-facing stocks.
“Liquidity on the VFEX has also improved significantly,” the brokerage added. “With average daily turnover up 197% from the prior year, reflecting deepening participation by both institutional and retail investors.”
The main exchange in Harare has borne the brunt of a yearlong liquidity squeeze that’s been in place since the 43% devaluation of the ZiG, short for Zimbabwe Gold, last September.
Trading on the ZSE has slumped, and IH Securities expects the slowdown will “continue to suppress stock market activity.”