Zimbabwe: Liquidity crunch stifles transactions on the Zimbabwe Stock Exchange

Limited access to cash in the economy has stifled trading on the Zimbabwe Stock Exchange (ZSE) amid a surge in trading of foreign currency denominated shares.

Market watchers believe that the current difficulty in accessing Zim$ was driven by the Reserve Bank of Zimbabwe (RBZ) deliberate measures to regulate the amount of currency in circulation and introduced gold coins to mop up excess balances in local currency.

To date, the central bank said gold coin buying has so far hit the Z$9 billion mark, with companies dominating the list of buyers.

In turn, the lucrative offering has seen most local investors choose to hedge their money against the coins and in doing so have abandoned other common investment avenues.

The latest data from the RBZ shows that during the month of July 2022, the ZSE traded on a negative trajectory largely reflecting the tight liquidity conditions in the money market.

As a result, the All Share, Top 10, Top 15, Medium Cap and Small Cap indices fell.

“The resource index, however, remained unchanged at 20,021.24 points, during the month under analysis.

“The cumulative volume of shares traded on the ZSE decreased by 11.54% during the month of July 2022, from 271.23 million shares in June 2022 to 239.94 million shares. Shares traded, however, rose 62.4% to Z$23.67 billion,” the report said.

During the period, the share of foreign purchases in the value of shares traded increased to 40.1% in July 2022, from 2.2% recorded in June 2022.

“There was also an improvement in the net external position to Z$1.51 billion from Z$2.68 billion recorded the previous month,” the report added.

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