What are the real returns on the ZSE in 2022 (year to date)?

After April’s massive bull run on the ZSE, we compared some ZSE indicators and indices against all measures of inflation in Zimbabwe namely ZimStat’s CPI inflation, The Purchasing Power Parity (PPP) inflation rate based on the devaluation of the Zimbabwean dollar at the official auction and PPP inflation based on the depreciation of the Zimbabwean dollar on the parallel market. The logic was that the ZSE at least on average still provided inflation-beating returns. After May’s policy-induced mayhem on the ZSE, we should have a look at this again. To simplify things we will adjust ZSE returns for PPP inflation at the parallel market rate.  As this has the greatest depreciation rate of all inflation measures available. So, how have ZSE counters performed versus the exchange rate in 2022?

Method

To calculate the adjusted return we have taken opening share values for the year and divided this by the parallel market rate estimates at that time of year (estimated at 1:220). We have then taken closing share values on the last trading day of May 2022 and divided them by the approximate parallel market rate on the day (estimated at 1:480) to eliminate the influence of the parallel market on pricing. From there we simply present the YTD return using our simple return formula which you can find in this article. We can use this as an estimated real return.  The method is for academic and entertainment use and is not meant to be relied on for investment decisions. Please speak to a registered advisor for advice.

Gainers

While ZECO is still king returns are rationalised from 500% YTD to 175% YTD and it stands out as the only counter to more than double investor money in 2022 so far. Axia which occupied the top spot before the madness of May measures in at 84.98%. High flyer Tanganda posts 78.63% while NMBZ (70.74%) and Conglomerate Innscor (48.32%) made up the top 5 gainers. The rest of the top gainers included First Capital Bank (30.87%), resurgent CFI (29.31%), and Econet proving inseparable from Ecocash (28.56% and 26.10% respectively) and RioZim (26.04%). In total 16 counters have positive YTD returns in our adjusted model.

Losers

The quick ones amongst you have already surmised that if there are 16 in the positive territory then the remaining 36 counters (including Finsec listed Old Mutual Zimbabwe Limited but excluding the ETFs) are in negative territory. Based on our method these counters have lost money in 2022 at least in theory. Medtech Class A isn’t surprising in its position but the extent of the returns would have wiped out nearly 3 quarters of investor value. Hot on the heels of Medtech is General Beltings Holdings which has a negative YTD return of -71.99%. One of 2021’s better performers in the second half of the year Zimplow (-62.88%) also gave investors quite a hiding. Rainbow Tourism Group (-58.88%) is sandwiched between First Mutual Properties (-61.98%) and First Mutual Holdings Limited (-58.53%). Masimba Holdings (-58.13%) surprisingly features here too though troubled Edgars stores (-57.85%) are not a surprise on such a list. ZB Financial Holdings (-57.71%) and building materials manufacturer Turnall (-55.30%) close out the bottom 10.

ETFs

We are very optimistic about ETF investing in Zimbabwe so we would of course dedicate some time to looking at ETFs. The Morgan and Co Multi-Sector ETF provided a theoretical return of 9.58%. The Old Mutual Top Ten (OMTT) ETF was hard hit by May’s market decline to make its YTD return based on our method of 4.98% while the Datvest Modified Consumer Staples (DMCS) would’ve cost investors 5.90% of their investment. It’s worth noting that both MCMS and DMCS were not present at the start of the year so this is from the day they started trading.

It’s sobering for those who are weary of high nominal returns on the ZSE in a currency that is rapidly depreciating.