ZSE almost doubles in massive April Bull run

The bulls have certainly been running wild on the ZSE as the exchange gained an incredible 94.39% in April 2022. The popularity of the ZSE as a hedge against inflation and currency depreciation is well documented across all corners of the Zimbabwean internet. With many people touting for Zimbabweans to join the ZSE those who heeded the call will certainly be pleased with the events of the month gone by. The ZSE took caution to adjust circuit breaker ranges downward as they know better than others that runaway inflation in Zimbabwe brings undue attention to the capital markets.

Performance

It was an unprecedented month as the market was full of gainers. Only one counter on the ZSE failed to gain in April 2022. Medtech Class B shares slip 19.12% while last year’s King Unifreight dropped by 9.81%. Unifreight is one of 13  (out of a total of 29) companies that have not yet presented December year-end financial results despite being given a 1-month extension to the normal 3-month deadline for publishing results. As for the gainers, the top 10 was a mixed bag. RioZim gained 205.45% to lead the gainers for April on the back of their new plant that will improve processes and locally produce some inputs. Tanganda surprised detractors who felt the company was overvalued when introduced by adding a further 160.62% to its value in April alone. Ecocash holdings received a 135.72% boost with the launch of its local USD remittance service and the annual PORTRAZ telecommunications report. Banks NMBZ (184.14%), FBC (108.48%) and First Capital (104.40%) all rode the wave of good December results reports. Axia (163.69%), Proplastics (114.29%) joined usual campaigners Econet (103.94%) and Innscor (101.60%) to make up the top 10 gainers.

A quick look at the VFEX shows BNC reversing last month’s gains by 4% while Caledonia held still. Small gains in SeedCo International were recorded (0.18%). Padenga holdings recorded 1.19% gains in the month.

The Exchange Traded Funds market followed the trend with huge gains in the Morgan and Co Multi-Sector ETF (47.04%) and Old Mutual Top Ten ETF (32.55%) as the Datvest Modified Consumer Staples Index ETF gained a reasonable 14.57%.

Making sense of it

There’s been a lot of discourse about just how valid the gains are on the ZSE. Those are some big numbers we are throwing around here; up 96.39% in April and 140.96% year to date. Many have appointed out that rampant inflation and exchange rate depreciation nullify the gains being made on the ZSE. There is some truth to this argument but we must look at the numbers to make sense of it all. The table below shows ZSE performance in April and year to date versus other economic indicators namely ZimStat CPI Inflation, the Auction Exchange rate and the estimated parallel market exchange rate.

The ZSE All Share Index average beats any measure of inflation or depreciation that exists in Zimbabwe based on these measures. Unfortunately, we cannot buy the All Share Index so while that argument is academically sound it is not practical. We can buy the top ten index through the Old Mutual Top Ten ETF (OMTT) which has also handsomely outpaced all measures of value erosion. However, that is not a green light to throw caution to the wind and throw money at the ZSE. On a YTD basis, 14 counters have performed below ZimStat CPI Inflation while on the other end 31 counters have performed above the parallel market depreciation rate. Stock picking is of the utmost importance.