• The ZSE is no longer a safe haven for currency hedge due to  a sharp decline in the exchange rate.

  • The ZSE has lost 12.36% year to date in USD terms, compounded by election spending and monetary policy loosening.

  • As the currency's value declines, it becomes harder for individuals and businesses to make ends meet, and the government needs to take action to restore confidence in the currency

Harare-The Zimbabwe Stock Exchange (ZSE) had a promising start in the first quarter of the year, being the African leader among all stock markets. However, the hyperinflationary situation in the country has taken a toll on the ZSE, with the market now standing at -12.36% year to date. The market, which was once considered a cushion for highly volatile local currency investment, is no longer a safe haven.

Over the last 7 days, the ZSE has dropped 7.1%, driven by an 11% decline in the financial sector. While the bourse has gained 826.71% year to date on nominal value, the exchange rate depreciation has fallen by more than 80% on an adjacent period, making the USD return less attractive in comparison with exchange markets.

The situation has been compounded by election spending and monetary policy loosening, which is expected to drastically increase the money supply. This is likely to lead to an accelerated depreciation of the exchange rate, making imports more expensive and contributing to inflationary pressures on the economy. As of May 31st, the Zim dollar's cumulative year-to-date loss stands at 65.9%, marking the worst performance since its reintroduction in 2019.

This situation is concerning for Zimbabweans who rely on the Zim dollar for everyday transactions. As the currency's value continues to decline, it becomes increasingly challenging for individuals and businesses to make ends meet. The government will need to take decisive action to address the issue and restore confidence in the currency.

In conclusion, ZSE is no longer a safe haven for currency hedge due to inflationary pressures and a sharp decline in the exchange rate. It is imperative that the government takes swift action to address the issue and restore stability to the market.

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