Zimbabwe bourse loses US$6 billion, index falls 40 per cent after military takeover

Zimbabwe soldiers prepare for the inauguration of incoming president Emerson Mnangagwa.
Zimbabwe soldiers prepare for the inauguration of incoming president Emerson Mnangagwa.PHOTO: AFP

HARARE (REUTERS) - Zimbabwe's stock market has shed US$6 billion (S$8 billion) while its main index has slumped 40 per cent since last Wednesday when the military seized power leading to the fall of Robert Mugabe, stock exchange data showed on Thursday (Nov 23).

The main industrial index was at 315.12 points compared with 527.27 points on Wednesday last week when the military announced its takeover and put former president Mugabe under house arrest. On Thursday the index fell 4.4 per cent.

The Zimbabwe Stock Exchange had been on a rapid rise in the last two months, driven by investors seeking a safe haven for their investment amid fears of a return to hyperinflation in an economy suffering acute shortages of foreign exchange.

But analysts said the market had entered a period of correction on investor optimism of a change in economic policy in a post-Mugabe era.

Market capitalisation was US$9 billion, down from US$15 billion last week, bourse data showed.

On the currency front, black market rates for buying cash dollars softened further on Thursday.

Buying US$100 using electronic transfer cost US$150, down from US$180 last week. Some black market traders said they were not buying dollars at all, anticipating further softening of rates.

Zimbabwe adopted the US dollar in 2009, along with Britain's pound and the South African rand, to tame inflation that topped out at 500 billion per cent.

"The market is adjusting back to reality," an analyst at a Harare-based asset management company said.

"The gains that we had seen were being fuelled by an outlook of a return to hyperinflation, continued isolation of Zimbabwe by international lenders as well as well as a depressed economic outlook."

An analyst at a local stockbrocking firm said Mnangagwa had hit the right notes with his speech on Wednesday.

Mnangagwa said he wanted to grow the economy, create jobs and for Zimbabwe to re-engage the international community as the country has faced isolation since 1999 when it defaulted on its debt with the International Monetary Fund.

Most of Zimbabwe's 13 million people remain poor and face currency shortages and sky-high unemployment, something Mnangagwa promised to address.