Zimbabwe Stocks May Rally on Unity Government, Renaissance Says

By Janice Kew

Feb. 3 (Bloomberg) -- Zimbabwe’s shares may surge after the southern African country’s leaders agreed to a unity government, Renaissance Capital said.

The Zimbabwe Stock Exchange All Share Index, which hasn’t traded in more than two months, may rally 150 percent in dollar terms this year, Renaissance said in a note today. The measure was one of the worst-performing equity markets in sub-Saharan Africa in 2008, falling 67 percent in dollar terms, according to the investment bank.

“Zimbabwe still has a good level of infrastructural development and human capital,” strategists lead by Dzika Danha wrote in the note. “Coupled with the sectoral diversification of the economy, this should pave the way for a rebound in the medium term should a serious macroeconomic program be implemented following the political settlement.”

The African Union said Jan. 31 that sanctions on Zimbabwe should be lifted after Morgan Tsvangirai, leader of the country’s Movement for Democratic Change, said he would join President Robert Mugabe in a coalition government to be established next month.

The Zimbabwe Stock Exchange shut down in November after the central bank accused some traders of using fraudulent checks to buy shares. Last week the bourse’s chief, Emmanuel Munyukwi, said the exchange would remain closed until the government agrees on a plan to denominate shares in dollars.

The All Share Index reached a record high on Sept. 15 following a previous power-sharing agreement and slumped after the talks stalled, Renaissance said. By Nov. 17 the stock market’s value had dropped to $1 billion from its September high of $6.9 billion, according to the Moscow-based firm.

Renaissance, which has offices in sub-Saharan Africa, recommends investors hold more Zimbabwe stocks than are represented by benchmark emerging-market indexes.

The probability of a 150 percent jump is 60 percent, Renaissance said. There is a 10 percent probability that the key index may surge 250 percent and a 30 percent probability it may rise 50 percent.

To contact the reporters on this story: Janice Kew in Johannesburg at jkew1@bloomberg.net.

Last Updated: February 3, 2009 08:11 EST