Zimbabwean stocks have fallen 50% since the end of April after authorities increased taxes on equity transactions and took other steps to support a collapsing local currency and tame triple-figure inflation.
Stocks have long been favoured by local investors seeking a refuge from the sliding domestic currency and consumer prices that rose 257% last month from a year earlier. But the benchmark index of the Zimbabwe Stock Exchange is in a record losing streak that has stretched to 13 days so far.
A combined 14 000 basis points in interest-rate hikes this year has played a role in drying up liquidity, as has the introduction last month of bullion coins to support the embattled Zimbabwe dollar.
"The gold coins are part of the reason," according to Lloyd Mlotshwa, head of research at IH Securities, a Harare-based brokerage firm. "However, measures taken even prior to the coins, such as increasing interest rates, increasing taxes on equities transactions and actively reducing money supply, all contributed to the current trajectory of the stock market."
Valuations have sunk so far that stocks may start to look like an attractive alternative to local investors wary of putting too much faith in gold, said Shelton Sibanda, chief investment officer at Imara Asset Management, the country’s oldest brokerage.
"There is a limit to how much exposure investors want to have in gold coins, which is an additional asset class," Sibanda said by phone. "For long-term investors, this is the cheapest that the stock market has been in US dollar terms."