Harare — The Zimbabwe Stock Exchange resumed trading on February 19, 2009, three months after its last trade in November 2008.

On the very first day of trading, the market was monopolised by sellers and as a result of that, the indices dipped below the 100 points opening level before recovering in March 2009 for the mining index and April, the same year for the industrial index.

To achieve a market capitalisation of around US$6 billion by December 2010, is proving to be a mirage. The major drivers of the current trends -- liquidity regime, policy environment and investment (capital investment) -- continue to look unimpressive. Both the industrial and mining indices reached their peak of 173.19 and 297.63 points in October and June respectively; it seems to be an exceptional feat to be repeated any time soon.

The Zimbabwe share market had turned to become a reliable barometer of GDP levels in the economy, as the era of rampant speculation by "underground investors" is over. ZSE recorded an average growth percentage above 200 percent in the six months from February to July 2009. During the same time period, the Johannesburg Stock Exchange had recorded a loss percentage 0.14 percentage and similar trends could be observed when comparing world stock exchanges to the ZSE.

Failure to build on the momentum could be blamed for a lacklustre performance of Zimbabwe's bourse. Different departments -- ranging from Economic Planning, Mining and Tourism -- held different international investment conferences. Different economic blueprints also came into fray which include the Short Term Emergency Recovery Plan (STERP), Three-Year Macro-economic Framework and then the upcoming Medium-Term Policy.

The ongoing debate on the indigenisation policy is not helping matters from the equities front, but socially it is a welcome move. The year 2009 ended with about 60 percent of foreign investors active on the ZSE, but this had declined so significantly inducing the liquidity crunch. Most of the counters on the industrial platform are limping, with about 80 percent of the industrial index market capitalisation emanating from about 12 counters.

When the ZSE reopened in February 2009, the industrial index market capitalisation was at US$1 257 886 billion, in March it increased to US$1.6 billion. April brought with it US$2,4 billion. The market capitalisation for the industrial index in May jumped to US$3,3 billion, in June it was US$3,6 billion. Same time this year it is already disappointing with most counters trading at a loss characterised by depressed market turnovers.

ZSE turnovers for the period February to June 2009 recorded a phenomenal rise. The turnover for February was US$536 285, in March it shot to US$3 014 535, US$11, 634, 695 for April.

Policy inconsistency and policy uncertainty both tend to pose a major threat to the ZSE's growth. The major worry at this juncture should not be automation (shift from call-over system) of the market. It is necessary but far from sufficient to see business growing to levels last witnessed when the ZSE used to be the second largest bourse in terms of listings and market capitalisation in sub-Saharan Africa.

The failure by the inclusive Government to raise the US$800 million, which is a vote of credit on the last budget statement, should send warning shots to those who believe attracting foreign direct investment is a function of rhetoric. The Medium-Term Policy is premised on expecting 44 percent of its funding to come from abroad, which makes it both unreliable and unrealistic. If only US$2,9 million was raised out of the required US$800 million, who is going to open the floodgates of aid, donations etc?

It is an indisputable fact that the gazetting of the Indigenisation and Economic Empowerment Act had rattled the market, our statistics point out that the market slumped 11,5 percent to the end of February 2010. With the Medium-Term Policy to be launched next month relying more on foreign direct investment, it remains to be seen how authorities will balance between empowering the people and attracting the US$11 billion required to achieve a GDP growth of 15 percent per annum without crowding out local investors.

On March 2 2009, hardly a month after the market reopened, the ABCH share was trading at 10c, but a year later, it was trading at 15c -- what a disappointing growth rate on an annualised basis. Econet shares shifted from 80c to 485c. The Old Mutual stock moved from 38c to 145c with the resource counter Bindura doubling from 10c to 20c. The returns for such selected stocks were certainly above the CPI. However, failure by corporates to maintain momentum on increasing capacity utilisation has curtailed on the growth potential of some industrial stocks notably.

The significant decline in corporate clients who used to "play" around the ZSE is obviously impacting on the share market growth with sanity now prevailing in the economy, for instance banks are no longer involved in non-banking activities. This includes investing directly into equities as a hedge against inflation. This has significantly reduced the effective demand for stocks leading to depressed prices for those particular stocks.

If the current economic atmosphere is to be maintained, with the indigenisation debate still raging, foreign direct investment not trickling through and economic blueprints being churned out without realistic targets, the equities market will continue stuttering. The maximum market capitalisation is likely to remain around US$4,2 billion and only 18 percent of the listed counters are expected to realise real capital gains.