RESERVE Bank of Zimbabwe deputy director for international banking and portfolio management Ernest Matiza’s prediction of the Zimbabwe Stock Exchange (ZSE) “bubble” bursting may finally be coming true as companies continue to make excessive losses on the main bourse.
The military takeover of government and the country since Wednesday last week has seen companies that gained during the ZSE bull run recording losses.
Of all the losses, Old Mutual seems to be experiencing the worst decline.
In August, Old Mutual Zimbabwe group chief executive officer Jonas Mushosho told NewsDay that their second half year strategy would be to continue leveraging of equities to remain profitable.
The strategy worked as the company attributed its 614% increase in profit-after-tax to $89,4 million during the first half of the year after investing in Econet, Delta, SeedCo, Innscor, British American Tobacco, Hippo Valley and OK Zimbabwe stocks.
The strategy seemed fullproof by the end of trading on Thursday last week, despite other companies starting to register declines in their share price the previous day.
However, as uncertainty in the market continued to grow, the company’s share price eventually dropped at the end of Friday’s trading by 19,58% and a further 19,57% at the end of trading on Monday.
The United Kingdom-based company’s share price dropped from $14,30 at the opening of trading on Friday to $9,25 as of the end of trading on Monday.
This translated to the company losing $335,44 million in a space of two days, registering a market cap of $614,42 million by the end of trading on Monday.
Looking at day-to-day trades since Wednesday, both that day and the following one registered zero trades as investors held off trading to assess the political atmosphere.
On Friday, investors started trading stocks again, which valued $57 500 before growing to
$92 500 at the end of Monday’s trades.
This pointed to investors wishing to sell off shares to make a profit before the share price went down any further.
As Old Mutual is the only company on the ZSE with fungible shares that can be traded across the border on the Johannesburg Stock Exchange and London Stock Exchange, analysts have predicted that more investors will be looking to offload their stocks in this way.
The company’s having fungible shares led to its year to date share price increasing to 309,5% as at the end of trading on Thursday. – Newsday