ZSE, VFEX mirror liquidity problems in the economy

Tapiwanashe Mangwiro

Zimbabwe’s economy is grappling with a severe liquidity crunch, as banks tighten access to funds and reduce lending activity.

This has had a pronounced impact on the country’s financial markets, with trading on both the Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Exchange (VFEX) reflecting the challenging economic environment.

On the ZSE, the All Share Index edged up marginally by 0,11 percent to close at 207.95 points, while the market capitalisation dipped by 0,88 percent to ZiG 62.03 billion.

Trading activity saw a dramatic increase in value traded, which surged by 1 968.57 percent to ZiG 28.55 million, indicating a concentration of liquidity in select counters. Leading the gainers was Cafca, which rose by 5,13 percent, followed by Econet with a 3,08 percent increase.

However, the broader market sentiment remained subdued, with Proplastics and OK Zimbabwe posting sharp declines of 15 percent and 13,52 percent, respectively, highlighting the uneven distribution of investor confidence.

Meanwhile, the VFEX showed stronger performance, with its All Share Index climbing 1,79 percent to 105.17 points and market capitalisation increasing by 2,07 percent to US$1,32 billion.

SeedCo International was the standout performer, recording an impressive 11,8 percent gain as investors sought refuge in well-established, export-oriented companies. Despite the positive movement in key indices, overall liquidity on the VFEX remained limited, with a total value traded of just US$159 613.30.

The liquidity crunch continues to dominate the economic narrative, as banks remain cautious in extending credit, exacerbating cash flow challenges for businesses. This has forced investors to focus on blue-chip stocks like Econet and SeedCo International, which are perceived as safer investments amid heightened uncertainty.

While both markets displayed resilience in specific areas, the broader picture underscores the strain on Zimbabwe’s economy. Tight liquidity conditions are likely to persist, casting a shadow over the near-term outlook for financial markets and the broader business environment.