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Zimbabwe Stocks Double in May as Investors Flee 766% Inflation

Zimbabwe Stocks Double in May as Investors Flee 766% Inflation

(Bloomberg) -- Zimbabwe stocks more than doubled in May as investors took shelter in equities in an attempt to protect their money from rampant inflation and a rout of the local currency.

The main industrial index on the Harare exchange has risen by a record 125% in the month. Figures out Friday showed annual inflation in the southern African nation raced to 766% in April. The Zimbabwe dollar has lost as much as 68% of its value this year against the greenback in the unofficial parallel market.

“This run is domestic-driven; there is increased liquidity that is looking for a home,” Justin Bgoni, the bourse’s chief executive officer, said by text message on Friday.

Zimbabwe Stocks Double in May as Investors Flee 766% Inflation

Using black market rates, the Harare market’s capitalization has increased 64% this year to $2.1 billion, according to data provided by the Zimbabwe Stock Exchange. At the official, pegged rate, the increase is 244% to $6.1 billion, from $1.7 billion.

The rush to the stock market is a response to the plunging value of the Zimbabwe dollar on the black market, the largest source of foreign currency for companies, said Stephen Mashozhera, head of advisory at Harare-based Access Finance.

“When the index goes up, it’s signaling a deteriorating inflationary and exchange-rate outlook,” he said. “Institutions buy equities as a hedge against inflation, which drives up prices, rather than keeping the money in debt instruments or in the bank.”

©2020 Bloomberg L.P.