How Zim stocks are reacting to COVID-19

Amidst the red arrows flashing across global markets, the Zimbabwe stock exchange stands as a beacon of resilience. The impact of the COVID-19 pandemic has sent shockwaves through financial markets worldwide, but how are investors and traders in Zimbabwe responding to the panic selling and market sell-off? In an exclusive interview with CNBC Africa, Batanai Matsika, the Head of Research at Morgan & Co, sheds light on the situation in Zimbabwe. He emphasizes that the economic challenges facing Zimbabwe are primarily country-specific, rather than being directly correlated to global market movements. The country is already grappling with a contracting economy and high inflation rates, which have not been significantly impacted by the recent turmoil in global markets. The Zimbabwe Stock Exchange (ZSE) has continued to operate steadily, with trading activity remaining relatively stable. While concerns about a potential global recession loom large, Zimbabwe's prospects remain uncertain. The country heavily relies on sectors like tourism and commodities for economic growth. The tourism sector contributes significantly to Zimbabwe's GDP and income, with a substantial portion of international arrivals originating from Asia, America, and Canada. The recent decline in global travel due to the COVID-19 outbreak has raised concerns about the impact on Zimbabwe's tourism industry. However, the country also benefits from trade within Africa, which provides a cushion against external shocks. In terms of commodities, Zimbabwe stands to benefit from shifts in markets, particularly in gold and oil prices. The decrease in oil prices could positively impact Zimbabwe's budget, as the country spends a significant amount on oil imports annually. However, the volatility in commodity prices poses a risk to the economy, especially for commodities that rely on global demand. As the COVID-19 virus spreads across the African continent, Zimbabwe faces challenges in terms of preparedness and capacity to deal with the potential outbreak. The government's response and level of preparedness have been called into question, given the existing fiscal deficits and previous natural disasters that have strained the country's resources. International support and engagement are critical for Zimbabwe to effectively combat the virus and mitigate its impact on the economy. In terms of investment opportunities on the ZSE, companies with significant export exposure continue to attract interest. Companies involved in gold mining, in particular, are seen as favorable investments amid the current market conditions. While global demand may slow down, export markets for these companies remain resilient. The recent announcement of plans to liberalize the interbank market in Zimbabwe could lead to a depreciation of the local currency, impacting importers but potentially benefiting exporters. Despite the uncertainties faced by Zimbabwe, its stock market demonstrates resilience in the face of global market volatility. The road ahead may be challenging, but Zimbabwe's ability to weather the storm will depend on its ability to adapt to changing market dynamics and navigate the economic landscape with resilience and agility.