HARARE
–
Zimbabwe’s
new
currency
has
wiped
out
a
more
than
330%
gain
on
the
stock
market
this
year,
leaving
investors
dealing
with
the
fallout.
The
Zimbabwe
Stock
Exchange
All
Share
Index
fell
99.95%
since
the
introduction
of
ZiG,
short
for
Zimbabwe
Gold,
on
April
5.
The
gold-backed
ZiG
succeeded
the
Zimbabwean
dollar,
which
had
lost
80%
of
its
value
this
year.
The
volume
of
trades
and
value
of
transactions
have
also
plunged
as
share
prices
were
converted
from
the
old
currency
to
the
new.
Prior
to
the
conversion,
investors
piled
into
stocks
as
they
sought
refuge
from
the
local
dollar’s
collapse
and
surging
inflation
that
in
March
stood
at
a
seven-month
high
of
55.3%.
The
bourse
offers
one
of
the
few
investment
options
in
the
southern
African
nation
for
investors
to
hedge
against
exchange-rate
volatility
and
inflation.
However,
a
surge
in
stocks
usually
is
a
cause
for
concern
and
not
jubilation,
as
it
signals
that
the
next
currency
crisis
is
around
the
corner.
Justin
Bgoni,
the
chief
executive
officer
of
the
bourse,
said
a
combination
of
factors
including
the
long
time
it
took
for
the
nation’s
lenders
to
complete
a
conversion
from
Zimbabwean
dollars
to
ZiG
and
tight
liquidity
conditions
in
the
market
led
to
the
exchange’s
poor
performance.
“Generally,
people
are
also
hesitant
and
don’t
understand
what
the
value
is
in
ZiG
terms,”
he
said
Monday
by
phone.
Share
prices
were
converted
by
the
bourse
at
a
swap
rate
of
1
ZiG
to
2,498
Zimbabwean
dollars
after
an
April
5
central
bank
order
that
the
ZiG
will
be
the
new
transacting
currency
used
for
everything
from
bank
account
balances
to
prices
displayed
in
supermarkets.
The
decline
in
trading
volumes
has
seen
revenues
of
some
brokerages
fall
at
least
50%
with
most
experiencing
a
“big
hit
to
earnings,”
said
Lloyd
Mlotshwa,
the
head
of
research
at
Harare-based
brokerage
firm
IH
Securities.
For
stockbrokers,
the
new
currency
has
had
a
domino
effect
resulting
in
low
“average
daily
turnover,
which
speaks
to
liquidity
and
then
a
knock-on
effect
to
the
stockbroking
industry,”
he
said.
Stockbrokers
in
the
capital,
Harare
said
Monday
they
are
experiencing
“a
painful
early
winter”
marked
by
limited
trading
volumes
on
the
stock
market.
Their
expectation
is
that
the
entire
stock
market
architecture
—
and
not
only
the
stockbroking
industry,
which
relies
on
market
turnover
—
will
suffer.
That
includes
custodians,
government
taxes
and
the
ZSE
company
which
collects
fees
and
commissions.
With
80%
of
the
economy
using
dollars
for
transactions,
it
is
also
a
“major
downside”
for
stockbrokers
that
the
stock
exchange,
which
has
56
securities
decided
to
trade
in
ZiG,
according
to
Enock
Rukarwa,
a
research
and
investment
consultant
at
FBC
Securities.
“In
the
face
of
such
headwinds
stockbroking
boutiques
need
to
recalibrate
their
business
models
derisking
commission
income,”
he
said.
Imara
Asset
Management,
the
nation’s
largest
independent
brokerage,
which
oversees
$100
million
in
assets,
also
expects
“some
upheaval”
over
the
next
month
with
share
prices
converted
to
ZiG
yet
to
find
new
levels.
“It
would
have
been
much
more
sensible
for
the
Zimbabwe
Stock
Exchange
to
convert
to
US
dollars
in
line
with
the
Victoria
Falls
Stock
Exchange
especially
now
that
many
of
the
underlying
listed
businesses
are
reporting
in
US
dollars
and
paying
US
dollar
dividends,”
John
Legat
and
Shelton
Sibanda,
the
chief
executive
officer
and
chief
investment
officer
at
Imara
wrote
in
their
April
client
note.