Zimbabwe’s dollar stock exchange jumps in value

The combined value of companies traded on Zimbabwe’s alternative, dollar-only stock market has soared 75% this year as investors take shelter from the rapid depreciation of the local currency.

The market capitalisation of the Victoria Falls Exchange has climbed to almost $1 billion, according to FBC Securities, a brokerage based in the capital, Harare. Companies are drawn to the bourse in the resort city because of broader sources of capital, tax incentives and better positioning for their brands, it said in a report.

The Zimbabwe Stock Exchange set up VFEX in 2020 to provide investors with the option of a market that has reduced risks from currency swings and surges in inflation. But so many companies are migrating their listings to the newer platform that it may pose a threat to its parent, FBC said, citing the increasing “dollarization” of the local economy.

“Migration of quality stocks from the ZSE to the VFEX, as opposed to new listings, may however be detrimental to the viability of the local-currency denominated bourse,” the brokerage said.

The southern African country abandoned its local currency in 2009, replacing it mainly with the US dollar after an episode of hyperinflation rendered the local money worthless. The Zimbabwe dollar was reintroduced in 2019 in a bid to revive the stagnating economy, but the government decided in June to make the greenback legal tender again to try and tame rampant price increases.

The Zimbabwean dollar depreciated 58% against the US dollar in the first quarter on the official market, according to FBC. The local unit officially trades at Z$989.06 against the greenback, but changes hands at about Z$1 700 on the streets of Harare.

© 2023 Bloomberg