ZSE closed indefinitely, says CEO

THE Zimbabwe Stock Exchange (ZSE), shut two months after the central bank accused traders of using fraudulent cheques, will remain closed until the government agrees on a plan to denominate shares in US dollars, the bourse’s chief said.
 “We’ve reached agreement in principle to dollarise trading, but there are still some issues,” Emmanuel Munyukwi, chief executive officer of the ZSE, said this week. “At this point it’s hard to say how long it will take or when trading will resume.”
Zimbabwe’s dollar, the world’s worst performing currency, has plunged to about 37 million per United States dollar at official rates from a 30,000 peg a year ago, and now trades as much as 40 billion on the black market.
The US currency is used for daily purchases, when it can be obtained, for ease of transactions. Businesses that trade in Zimbabwean dollars raise prices as many as four times a day.
Zimbabwe has been mired in a decade of economic recession that caused shortages of food, fuel and other basic commodities.
At least 2,971 people have died as a result of a cholera outbreak, according to the United Nations. Inflation is about 89.7 sextillion percent, based on estimates by the Cato Institute in November.
The ZSE has been one place where local assets had been able to make up for some of the currency’s devaluation and inflation. The ZSE Industrial Index gained 56,436 percent in September, and 3,765 percent in October, according to Bloomberg data.
Trading was stopped from November 21 after the central bank accused some traders of using fraudulent cheques to buy shares.
Eleven companies and nine individuals had their accounts frozen on November 20 after the cheques totaling “60 hexillion” Zimbabwe dollars had been used to buy shares, Zimbabwe’s central bank governor Gideon Gono said in a statement.
Lawmakers are discussing whether to use the US dollar, the South African rand or the Zimbabwean dollar in the national budget, due to be presented today.
They must also decide whether stockbrokers should be required to lodge dollar deposits with their bankers or the central bank, Munyukwi said.
 Zimbabwe’s Securities Commission may demand a $500,000 guarantee from stockbrokers before trade on the ZSE resumes, the state-owned Herald reported last week, citing Willia Bonyongwe, the commission’s chairwoman.
The prices of stocks will also have to be re-evaluated and a review of taxes will have to take place, Munyukwi added.
 Some  seven percent of the trade on the ZSE goes to the government in the form of stamp duty, value-added tax and commissions, Rishay Lalla, a fund manager at Imara Asset Management said.
Zimbabwe’s main opposition party will decide this weekend whether to bow to southern African leaders’ insistence that it agree to implement a power-sharing agreement and join President Robert Mugabe’s government.
 “In the economic carnage of the last 10 years, the Zimbabwe Stock Exchange has almost been this one beacon of light,” Russell Loubser, chief executive officer of South Africa’s stock exchange, said in an interview.
The closure of the exchange has left investors with “no vehicle in which to maintain the value of their dollars,” Lalla said.
“The price of stocks in the last few months have been distorted because of the hyper inflation.”
                   — Bloomberg