Effects of Multiple Currency System on The Equity Markets of Zimbabwe

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The equities market: Past, present, future
Friday, 08 February 2013 00:00

Business Correspondent The adoption of the multiple currency system in 2009 saw a transformation of the equities market in Zimbabwe. Individual investors who had become active during the hyperinflation era became incapacitated and local institutional investors grappled with liquidity challenges that saw them turning to invest on the money market. Foreign investors became the major drivers of liquidity on the market as their participation increased from 35 percent in 2009 to 47 percent  in 2012. The returns on the ZSE have exhibited great swings over the past four years. In 2009 the industrial index recorded a 52 percent  return while the mining index moved 85,5 percent  up. However, following the gazetting of the Indigenisation Regulations in February 2010 that compelled all foreign-owned businesses to cede 51 percent equity to indigenous citizens, the equities market reacted negatively and started to slide. As a result, the industrial index lost 0,4 percent in 2010 while the mining index managed an 8 percent gain. The pronouncement of the indigenisation of the mining sector in 2011 resulted in the mining index tumbling 49,75 percent  during the year while the industrial index shed 3,58 percent . It would appear the market had internalised all the risk factors in 2011 as there was a mild recovery in 2012 which resulted in the industrial index gaining 4,48 percent. The mining index continued in losses, dropping 35,33 percent owing to the idiosyncratic challenges that faced the four listed mining companies. Rio Zimbabwe was plagued by debt while Bindura had been mothballed since 2008 owing to working capital challenges. Hwange had acute working capital challenges whilst Falgold was undergoing a transition from care and maintenance to moderate production. The year 2013 began on a positive note for the equities market as foreign investors continued to pour in money despite the potential...
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