Investors inundate brokers as Zim shuts bourse

STOCKBROKERS in Zimbabwe are struggling to explain to investors what happened to their money after the government shut the stock exchange.

The Zimbabwe Stock Exchange announced on Sunday that it had suspended trading to comply with a directive by the information ministry late on Friday that the bourse closes.

It’s the latest in a series of measures the government has implemented to try and stabilise the nation’s currency.

Traders have been inundated with calls from “shocked and stressed” investors, Thedias Kasaira, managing director at Imara Edwards Securities said.

“Clients are asking and we don’t know what to tell them. They want an explanation, but we have not been able to give one as we also don’t know the reason,” he said.

Zimbabwe’s benchmark industrial index has risen more than seven-fold this year to a record. Investors have used the domestic bourse as a haven from the country’s collapsing currency and inflation of 786% – the highest rate in a decade.

Investors with cash in Zimbabwe prefer to buy shares to avoid their money losing value.

Movements in domestic stock prices track the parallel currency markets on the streets of Harare, where the Zimbabwe dollar changes hands at about 100 per US dollar, compared with the official rate of 57,35.

“People are looking at a hedge against inflation, and that is why they are switching from Zimbabwe dollars to equities. The stock exchange serves as a proxy to parallel market rates,” said Lloyd Mlotshwa, head of equities at IH Securities.

The measures come after president Emmerson Mnangagwa last week warned his government will tackle “malpractices” that he said have undermined his government’s efforts to end an economic crisis, and which resulted in mobile-phone platforms also being suspended.

“Despite rhetoric that Zimbabwe is open for business, the country is increasingly closed off, and the regime is struggling to abate the economic crisis,” said Nathan Hayes, an analyst at the Economist Intelligence Unit.

The move to shut the Zimbambwe Stock Exchange will limit demand for foreign currency, as investors will not be able to disinvest, Hayes said. – Bloomberg

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