THE Zimbabwe Stock Exchange (ZSE) gained $286,760 billion in value during the third quarter of this year due to inflation hedging activities and increased retail investors participation, a report by Old Mutual Investment Group Zimbabwe said last week.
Zimbabwe’s largest investment management firm said all major indices were positive during the third quarter.
“Value of trades decreased by 2,96% to $11,453 billion in Q3 2021 (third quarter of 2021) compared to Q2 2021 (second quarter) due to IMF special drawing rights (SDRs)-induced market slow down experienced in August,” the report read.
“Foreign investors registered a net quarterly sell-off of $685 million compared to $3,27 billion in the prior quarter. Foreign trades accounted for 6,8% of total trades during Q3 2021, down from 22% in Q2 2021. There was a significant jump in trades on the Victoria Falls Stock Exchange (VFEX) due to the addition of Padenga onto the bourse. US$473,336 worth of trades in Seed Co International and Padenga Holdings were recorded in the quarter,” Old Mutual said.
It added that the performance of the official foreign exchange auction market and the supply of foreign currency in the economy remained key determinants of the direction of macro-economic variables in the outlook.
As such, Old Mutual said the local currency was expected to remain under pressure on the parallel market, sustaining high inflationary concerns in the near term.
The Reserve Bank of Zimbabwe (RBZ) has taken steps to strengthen the local currency by mopping up excess liquidity in the financial system.
It plans to issue exchange rate-linked instruments directly to corporates with excess local currency balances, according to Old Mutual.
“The instruments are seemingly akin to non-negotiable certificates of deposits RBZ is already issuing to banking institutions with excess liquidity. RBZ is yet to issue guidelines on the implementation modalities of the instruments,” it said.
In addition, to open market operations, the central bank committed to clear the foreign currency auction settlement backlog which has reportedly deteriorated to over 10 weeks.
The source of funding to clear the backlog, Old Mutual said, were unclear with possibilities of RBZ utilising the SDR injection to bankroll the auction.
The RBZ has attributed the backlog to malpractices by certain entities that were
sponsoring multiple bids on the auction system.