Zimbabwe Stocks Slide as Market Reopens Without Old Mutual
Zimbabwean stocks tumbled as trading resumed for the first time in five weeks after authorities shut down the exchange for allegedly contributing to the plunge in the local currency.
The government had said that the shares of Old Mutual Ltd., PPC Ltd. and Seedco Ltd. were being used to manipulate foreign-exchange rates. Those stocks, which have dual listings on other exchanges outside the country, weren’t allowed to resume. The main index fell 4.5%, while mining counters dropped by 2.4%.
Activity was light, with 117 trades worth a total 10.25 million Zimbabwean dollars ($134,000). That compares with an average daily turnover of 95 million Zimbabwean dollars in June.
“It has been an excruciating time,” Justin Bgoni, chief executive officer of the Zimbabwe Stock Exchange, said on Twitter, referring to the suspension in dealing that started on June 29. Bgoni said he was satisfied with the volumes, given the circumstances.
The exchange had been in weeks of talks with the government on how to reopen the market. The ruling party had demanded that the listing of Old Mutual, the biggest company by market value, be terminated. Authorities said the insurer’s share price was being used to determine a future rate of the country’s currency.
The market upheaval has added to an economic crisis in the southern African nation, where inflation has surged to more than 700% and there are shortages of food, fuel and foreign exchange. The Zimbabwe dollar trades at more than 100 in a parallel market, compared with the official rate of 76.7596 to the U.S. dollar.
The bourse has been a counter to inflation, with the all-share index having climbed more than sevenfold this year.
The state wants to transfer the three companies’ listings onto a foreign-currency denominated exchange in the resort town of Victoria Falls, planned for opening later this year.
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The resumption of trading should help restore the integrity of the local market and offer some relief to people who couldn’t access their investments, said Ranga Makwata, an independent financial analyst.
“Obviously, the collateral damage from the suspension is huge and it may take a while to restore investor confidence to its pre-suspension level,” he said.
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