Stock Exchange resumes trade

http://www.thezimbabwetimes.com/?p=14062
March 26, 2009By Our CorrespondentHARARE - The Zimbabwe Stock Exchange resumed trade today with only one counter trading.Only Apex Corporation traded after all the other counters' offers found no takers as the equities market in now trading in US dollars.Interfin, the only active counter, bought 3 026 Apex shares at 1 US cent during the trade.More than half of the 78 listed counters were offering prices between 1 cent and 5 cents. The prices were however all less that 0, 70 cents when trade stopped on November 20 last year.ZSE chief executive Emmanuel Munyukwi said he was happy that trade had resumed and that some outstanding issues would be addressed while trade was active."It is a positive move. There are still some outstanding issues which we hope will be addressed as shares change hands," said Munyukwi.Trading was brought to a halt on the ZSE on November 20 after Reserve Bank of Zimbabwe governor Gideon Gono discovered that banks were using fraudulent cheques to artificially inflate share prices.As trade resumed yesterday a brokerage fee of 2 percent was agreed for purchases, as the Ministry of Finance said it wanted to boost tax, although brokers wanted 1 percent.Stamp duty was agreed at 0, 5 percent while Value added Tax would be 15 percent of brokerage fee.Fungibility was restored for all dual listed counters and a letter to that effect was on its way to the Reserve Bank.Trade on the bourse is now supposed to be backed by a letter of confirmation from a bank chief executive officer.The Zimbabwe stock market had over the past two years been the preferred investment vehicle as it offered returns which were above inflation.While the country's economy was crumbling, the Zimbabwean share speculator was earning returns above inflation, keeping up much better than ordinary citizens on the street.Most shares were gaining by over 50 000 percent in one day. This jump in share prices was in excess of increases in consumer prices which averaged 10 000 daily during the same period.Events that stimulates Gross Domestic Product (GDP) - a country's wealth, will growth inevitably drives stock prices up, and any event that hurts GDP growth pulls stocks prices down.The opposite was, however, happening in Zimbabwe, share prices were rising while the economy continued to collapse.Economic analysts said excess growth in money supply was giving a wrong impression to investors who used the Stock Exchange as a barometer for Zimbabwe's economic performance.The country has been suffering from catastrophic economic and political policies, largely blamed President Robert Mugabe's government. The only means for government to fund itself has been to print bank notes.The stock market had become a prime beneficiary of any monetary expansion. Fresh money enters the economy first through banks and other financial entities that may invest it in shares, or lend it to others who buy shares.Thus stock prices rise above prices of food and other investment vehicles and will outperform them as long as this monetary process is allowed to continue.