Zimbabwe stocks have paused for breath after soaring about 370% in 2021, a breakneck rally spurred by investors turning to the bourse as a haven against inflation.
Harare’s All Share Index posted a rare, four-day decline last week, with local market watchers saying the eye-watering gains had become overdone and a pullback was needed.
“The market does seem to be cooling off,” said Thedias Kasaira, managing director at Imara Edwards Securities.
The excessive increase in share prices was captured in at least one technical indicator: the 14-day relative strength index on the benchmark Harare stock gauge peaked at almost 99 on Oct. 21, when stocks took their gains to 367% since the start of the year. That’s well above the level of 70 that some technical analysts see as suggesting a market has risen too far and may be about to swing lower.
To be sure, it seems stocks may soon resume their ascent, given that investors have few other options and locals with cash prefer to buy shares to avoid their money losing value. Annual inflation in October quickened to 54.5% and the central bank last week raised its main lending rate to 60% in an attempt to tame that increase and to stabilize the free-falling Zimbabwe dollar.
Also read: To dollarize or not? Zimbabwe’s monetary headache
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