The market capitalisation — measured by multiplying the total number of shares of stock listed entities and the prices — is closely followed by investors to judge the performance of any bourse.
Figures from ZSE show that market capitalisation surpassed the US$4 billion mark on Monday from the US$3,9 billion recorded the previous Friday.
On Tuesday it moved to US$4 143 896 934 before ending the day at US$4 149 771 979 on Wednesday.
With locals short of cash, foreigners were a major driver snapping up shares in heavy counters.
Investment analysts say the current trend is unsustainable and will taper off when foreigners exit the market.
“In terms of market capitalisation, it has overrun itself.
‘We anticipate that the run will come to an end.
“We feel that a market capitalisation of between US$3,5 billion and US$3,8 billion is reasonable,” an analyst said.
The analyst said the market is dominated by heavy counters and once the interest subsides, the market capitalisation will be affected.
ZSE’s market capitalisation is dominated by 10 counters which constitute over 60%.
The smaller counters are struggling and according to financial results released recently, a huge chunk of them are looking for fresh capital for retooling.
“Of the 77 listed counters most of them are not active and this will pull down the market,” a research analyst said.
In the outlook, analysts are not expecting significant growth as there are other factors that drive the market.
Uncertainty hasn’t been killed with principals in the unity government singing from different hymns on elections.
Capacity utilisation in the manufacturing sector though on the upward trend, has not yet attained the desired growth and analysts say this will also affect activities on the ZSE.
Liquidity constraints are still with the market and the only way that it can be stemmed is through lines of credit and foreign direct investment but analysts fear the ghost of the empowerment laws will return to chase away investments.
“With this in mind, chances are slim for a significant shift upwards of the ZSE market capitalisation,” an analyst said.
Emmanuel Munyukwi, the ZSE boss said although they were happy with the performance of the bourse so far, it was premature to celebrate the gains.
“It’s a good development that there is a movement. US$4 billion is a good psychological point and we want the momentum to be maintained,” he said.
The performance of the stock exchange is an indicator of the state of the economy.
If the ZSE sneezes, the 20 stockbrokers catch the cold as they derive their income from the increased volume of trade on the bourse.
Last year, the government slashed the transaction costs on the buying and selling of shares to 3,5% from 7,5% to bolster activity on the bourse. The move was also designed to align the transactional costs to those obtaining in the region.
The introduction of an Automation Trading System would improve efficiency on the stock exchange by reducing transaction cycles while the establishment of a Central Securities Depository would facilitate the maintenance of settlement and ownership records.