ZSE market capitalisation gain $882,3 billion in 2021
THE Zimbabwe Stock Exchange’s (ZSE) market capitalisation rose to $1,3 trillion in December last year from $434 billion in January as investors diverted funds onto the market as a hedging strategy against an increasingly volatile parallel market rate.
In their portfolio manager’s digest for the fourth quarter of 2021, Old Mutual Securities (Omsec) said the increase of the ZSE’s market capitalisation was due to investors preferring the local bourse as a value preservation platform in a high inflation environment.
“The growth in the ZSE market capitalisation has been supported by firm demand for shares on the local bourse as investors continued pursuing value preservation strategies through real assets such as equities. Inflation pressures are expected to sustain value preservation strategies in 2022. Resultantly, the equities market is projected to maintain a bullish trend in the year,” said Omsec.
The ZSE’s market capitalization opened the year at $434,8 billion rising to $501,1 billion and $531,7 billion in February and March. The figure continued to increase, recording $540,7 billion in April and $634 billion in May. In June and July the figure rose to $745,1 billion and $803,9 billion before slightly declining to $792,2 in August.
The local bourse’s market capitalisation gained in September to breach the trillion dollar market to record $1, 032 trillion. In October the figure was $1,378 trillion while November $1,290 trillion was recorded.
The ZSE plays an integral part in mobilizing resources for the development of the economy. Market capitalisation or market cap is the value of the corporate institutions based on the share price multiplied by the number of issued shares.
“In addition to inflation, increased aggregate demand is mainly public sector driven and dollarisation of the economy (dominant informal sector) is anticipated to support volumes and earnings growth for select listed entities. Some of the challenges likely to undermine company valuations in the outlook are a relatively sticky auction rate and multiple exchange rates,” Omsec said
As owning stock represents owning the company, including all its assets, capitalisation could represent the public opinion of a company’s net worth and is a determining factor in stock valuation. The ZSE’s market cap represents the valuation of all listed stocks on the bourse, and an increase represents a firming of share prices and therefore positive sentiment.
Going forward, Omsec said they anticipate an annual inflation of over 40 percent for 2022 adding that money market investments were likely to be constrained by current inflationary concerns.
“Liquidity and valuation challenges are expected to limit investments into property. Based on this assumption our view is that the equity sector remains attractive in the short to intermediate term from a liquidity and value preservation perspective. We believe that investors should focus on counters in sectors earmarked for higher growth in the 2022 proposed budget such as the tourism, mining, and the manufacturing sectors,” the financial service firm said.
ZSE market capitalisation gain $882,3 billion in 2021
