Question

Analysis of the current state of the 4 functions of the stock market in zimbabwe (500 words)

Answer 1

About -

• The Zimbabwe Stock Exchange (ZSE) is based in Harare, Zimbabwe.
• The Zimbabwe Stock Exchange provides a properly constituted and regulated environment that ensures market integrity and fairness among stock market participants. They supervise and monitor the trading process to ensure transparency in the market and that no unfair practices are done to manipulate the market.

Functions of the market -

Critical link -

• They provide a critical link between companies that need funds to set up new businesses or to expand their current operations, and investors that have excess funds to invest in such companies.

Market regulation -

• They provide a regulated market place for buying and selling of shares at prices determined by supply and demand, not withstanding other macro economic fundamentals.

Market integrity and fairness -

• The Zimbabwe Stock Exchange provides a properly constituted and regulated environment that ensures market integrity and fairness among stock market participants.

Fair trading and supervision of the stock market -

• They supervise and monitor the trading process to ensure transparency in the market and that no unfair practices are done to manipulate the market.
• Any off market deals and any unethical criminal activities are dealt with within the framework of the rules and regulations governing stock market transactions in Zimbabwe.
• Only stockbrokers and authorized dealers are allowed to transact in shares on behalf of the public.

Current State of the market -

• On 26 June 2020, the Zimbabwean government announced that the stock exchange and mobile phone-based payments would suspend trading from 29 June in order to impose measures that were expected to address the RTGS dollar, which has been experiencing high inflation since its introduction.
• The exchange resumed operations on 3 August 2020.
• Many wealthy Zimbabweans invests in the local stock market. Not for the value they see in the companies whose stocks trade on it, but as a hedge against surging consumer prices: while annual inflation is running at 786%, the benchmark Zimbabwe Stock Exchange industrial index has risen sevenfold this year.
• Zimbabwe stock market has resumed it's operation, however it started without a few major stocks of a few listed entities which "acted out of line" with rules and best trading practices.
• Zimbabwe Stock Exchange’s Direct trading platform that allows ordinary folks like you and me to buy shares from our laptop and smartphone has finally been launched.
• The Zimbabwe Stock Exchange (ZSE) ended September 7.5 percent higher and investors may have made a killing on real returns, if inflation for the month comes out lower.
• The ZSE market capitalisation, which closed the month of August valued at $175.7 billion, gained approximately $30.8 billion to close the month at $206.5 billion.
• The number of shares that exchanged hands during the month of sepetember 2020, at 1,093,040,821 were more than double the previous high of 379,970,700 that changed hands in June 2020.