Zimbabwe’s Cheap Stocks Struggle To Compete In Africa’s Exchange Market

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Written by Makula Dunbar

While there is hope for the expansion of Zimbabwe’s economy — the IMF has predicted 3.2 percent growth — the country’s stock exchange remains one of its major downfalls.

According to Bloomberg, shares made available in Zimbabwe are the cheapest in Africa. Still, there’s one firm that says investors will steer clear from the country’s stock market as long as there is major room for improvement across Zimbabwe’s financial institutions.

Banks are described as “weak” because the economy is sifting through permanent recovery plans. In November of 2014, the IMF released a statement saying that “Zimbabwe’s economy is at a crossroads” and that “the economic situation remains difficult.”

The third IMF Staff Monitored Program was completed at the time of the press release statement, which found a positive point in noting that Zimbabwe managed to reach financial targets for the first-half of 2014. However, overall instruments that invite investment and growth — like the Harare bourse — are unstable.

“I don’t see a catalyst for change in the near term,” Joseph Rohm, Investec Asset Management portfolio manager told Bloomberg in regards to hope for stock exchange improvement. “The economy’s very weak.”

Bloomberg also reported that stocks on the Harare bourse have had a recent track record of falling at twice the rate that they are gained. Nonetheless, its five-year value average (3.42) measures up with the rest of Africa’s stock exchanges.

“There’s a liquidity crisis in the Zimbabwean banking sector and the consumer’s under pressure…They’re some of the cheapest stocks in our universe, but they might remain cheap for a long time,” Rohm said.

Counting political troubles as another deciding factor, Investec has eased up on its existing stock investments in the country.