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Zimbabwe's economy 'sinks'
06/12/2006 13:17 - (SA)
Harare - In between scribbling, shuffling small pieces of paper and tapping calculators, the brokers yell loudly, clamouring for attention.
It's another busy day at the Zimbabwe Stock Exchange (ZSE).
The bull ran here was an odd side effect of an economic crisis that had seen inflation spiral to more than 17 000% - the highest in the world - while unemployment had hit 80% and poverty levels had soared.
The crisis had been widely blamed on President Robert Mugabe's government, but it denied responsibility and said it was a victim of a Western sabotage campaign over a controversial and sometimes violent land reform programme.
ZSE 'offers highest returns'
Patrick Saziwa, an analyst with Kingdom Stockbrokers, said: "In a normal economy, stock market performance should mirror the economic prospects of the country, but in our case it is a lot different.
"I think the good rally is because there are very few investment options that can provide real returns."
The Africa Stock Exchanges Association (ASEA) said the ZSE was among the bourses that offered investors the highest returns in Africa in 2005 and for most of this year, despite a deep economic recession.
ASEA statistics showing the ZSE recorded a 1 545% rise in 2005 and shot up by more than 2 000% between January and the first week of November 2006.
The ZSE had a market capitalisation of about $20bn, with 9.6 million shares valued at $760m traded in 2005.
Compared to Johannesburg's JSE Securities Exchange, which had a market value of 3.5 trillion rand ($489.2bn) at the end of 2005, this was tiny. But, Zimbabwean investors said their exchange was one of the few places in the country to get good investment returns.
ZSE 'haven for speculators'
ZSE chief executive Emmanuel Munyukwi said: "People know where the good returns are. The stock market is one of the few to offer these and this is why we see it performing above all markets."
Reserve Bank of Zimbabwe governor Gideon Gono had said the ZSE had become a haven for speculators, where "dirty" money from illegal foreign currency trading was used.
Some companies had been accused of taking advantage of special low interest rates meant for troubled industries to borrow money cheaply and buy shares, instead of using the funds to improve industrial production.
The central bank's recent efforts to mop up excess liquidity from the market by hiking bank statutory reserve requirements to 60% from 45% and forcing the banks to invest more funds in long-term bonds had failed to halt the bullish trend.
Shares here could rise by more than 50% in a week, something not lost on investors scouting for opportunities to hedge against inflation of more than 1 000%.
Heavily capitalised stocks like Old Mutual Zimbabwe, Pretoria Portland Cement, hotel group Meikles Africa and mobile phone firm, Econet Wireless, had largely driven activity at the stock market.
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