The newly enacted Zimbabwean currency is now costing much of the local stork markets due to it’s unsteadiness.

The Zimbabwe Stock Exchange (ZSE) has so far lost a total of US$18bn in value since the government decided to drop a parity peg to the US dollar in February this year.

In January 2019 before the drop of the parity peg, the ZSE was valued at US$20.8 billion which was an all time high.

At the end of October this year, the ZSE’s market capitalisation was valued at US$1.9 billion. Since 2009, Zimbabwean stocks had been trading in US dollars. It therefore, offered limited currency risk to foreign investors as the parity peg kept the exchange rate between the local currency and the US dollar at an equal value of 1:1.

Lloyd Mlotshwa, head of equities at IH Securities cried foul on the repercussions of the local currency, “the massive devaluation of the currency has caused a dislocation in stock market valuations.

Some firms are trading below the replacement values of their plants. At the same time, sentiment is so negative that this isn’t necessarily being interpreted as a buy signal.”

Zimbabwe Stock Exchange chief executive officer Justin Bgon also shared the same sentiments, “we are really down on foreign investors and we almost have no new money coming in.

We want foreign investors, especially when you have a devaluation of this sort, because they would be able to see bargains and bring up the prices, but then, they can’t take their money out, due to foreign exchange controls and other Treasury regulations.”

As part of the currency reforms, the use of foreign currency was banned for all local transactions. This meant stock market investors lost value in real terms due to the depraciation of the local currency.0