Headlines From 2008: "Zimbabwe Stock Exchange Soars As Others Crash"

Tyler Durden's picture

From Businessweekly, October 22, 2008

While markets across the world have been crashing, the Zimbabwe Stock Exchange has being seeing record gains as citizens turn to equities to protect their money from the country's hyperinflation.

The benchmark Industrial Index soared 257 percent on Tuesday up from a previous one day record of 241 percent on Monday with some companies seeing share prices increase by up to 3,500 percent.

But before Wall Street traders start packing their bags and heading south, they should bear in mind that these figures are just another representation of Zimbabwe's collapsing economy and are almost meaningless in real terms.

Zimbabwe, once a regional breadbasket, is staggering amid the world's worst inflation, a looming humanitarian emergency and worsening shortages of food, gasoline and most basic goods. Inflation is at 231 million percent, but some experts put it more at about 20 trillion percent.

"Why leave money in the bank?" asked Emmanuel Munyukwi, chief executive of the Zimbabwe Stock Exchange at a seminar on the doing business in Zimbabwe on Tuesday.

"People are forced to come on the stock market. They believe that after hard currency, the stock market is the only viable option where you can get a bit of a return," he said.

Zimbabwe's stock exchange, established in 1896, is one of Africa's oldest and the fourth largest. A securities commission has been established and it is hoping to follow in the footsteps of other countries like its neighbor South Africa and list as a company.

There are 19 stockbroking firms in Zimbabwe and 90 percent of investors come from institutions, asset managers or pension funds. About 8 percent of investors are individuals and only 2 percent are foreigners. This is in comparison to about a decade ago when foreigners made up about 30 percent of investors.

Munyukwi expressed his dismay at the "gross economic mismanagement" by the Zimbabwean government which has led to the collapse of the economy, however, the stock exchange was managing to survive despite the harsh environment.

He cited Zimbabwe's isolation from the international world _ and therefore protection from the financial turmoil _ as one of the reasons the market was performing well.

"We all know what has been happening to the world financial markets, yet the stock exchange in Zimbabwe is breaking all records. We are running short of superlatives to describe the performance of the market," he said.

With the unofficial exchange rate leaping from 30 million Zimbabwean dollars to US$1 on Friday to 100 million to the greenback Monday, showing a shortage of cash, people are trying to hedge against inflation by turning to equities.

Some of the winners have been government controlled Zimpapers, which gained 3,471 percent on Monday to give a share price of US$0.8 while cement maker Lafarge saw their share price rise 1, 400 percent to US$0.90

Companies such as Dawn and African Sun, which are in the tourism sector, have seen real growth in U.S. dollar terms of over 300 percent.

The biggest sector on the stock exchange is financial services with newest listings being in the mining sector. Zimbabwe has vast untapped mineral wealth including gold, diamonds and platinum.

Munyukwi said market performance was also being driven by strong, cheap assets which are offering returns that were more than matching inflation.

"Some people think that this is a bubble about to burst but I don't think so," he said.

He acknowledged though that the market was largely overvalued in Zimbabwean dollar terms but undervalued in U.S. dollars.

Jonathan Waters, head of ZFN, a financial networking and analysis company, cautioned against too much optimism over the performance of the market.

"Nothing has really changed. The market is treading water," he said.

Waters also said volumes being traded were very small and there was no real movement year on year. The market value of the ZSE being about US$2.5 billion compared to South Africa's JSE, which is worth about US$460 billion.

Waters also cautioned about volatility in share prices with some stock being expensive the one week and cheap the next or vice versa.

Munyukwi said a political solution was vital to the resuscitation of the economy and expressed hope that the deadlock in talks over power-sharing between the opposition and President Robert Mugabe would be resolved. A deal is also key to unlocking millions of dollars in much-needed foreign aid.

"There has to be political change," he said. "And I believe it will come sooner than we think."

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macholatte's picture

from Wikipedia

Hyperinflation in Zimbabwe began in the early 2000s, shortly after Zimbabwe's confiscation of white-owned farmland and its repudiation of debts to the International Monetary Fund, and persisted through to 2009. Figures from November 2008 estimated Zimbabwe's annual inflation rate at 89.7 sextillion (1021) percent.[1] By December 2008, annual inflation was estimated at 6.5 quindecillion novemdecillion percent (6.5 x 10108%, the equivalent of 6 quinquatrigintillion 500 quattuortrigintillion percent, or 65 followed by 107 zeros – one googol 65 million percent).[2] In April 2009, Zimbabwe abandoned printing of the Zimbabwean dollar, and the South African rand and US dollar became the standard currencies for exchange. The government does not intend to reintroduce the currency until 2010.[3]

 

If you print money like in Zimbabwe... the purchasing power of money goes down, and the standards of living go down, and eventually, you have a civil war.
Marc Faber

barkster's picture

So, i guess this means the Dow is a serious buy in about five years.

FEDbuster's picture

Kudos to Glenn Beck's show yesterday, he laid QE2 out for a couple million people:

http://www.youtube.com/watch?v=gk33gnUvCgc&feature=player_embedded

http://www.youtube.com/watch?v=GJmJqG7YJuo&feature=player_embedded

Calls for Congress to bring Bernanke up on perjury charges regarding his "no monetization" statement given under oath.

TheGreatPonzi's picture

I don't get the point of equities to protect against hyperinflation instead of precious metals and alternate currencies.

cossack55's picture

Some would say ignorance, I would state categorically...stupidity.

FEDbuster's picture

I wonder if someone could find and post a fact based chart of the cost of one oz of gold in Zimbabwe dollars during this same period?  I am just guessing that it rose even faster than the 200+% days the "stock" market had.

BigJim's picture

Shouldn't be too hard to calculate. Just look at the price of gold in US$ for the two dates, and then look at the exchange rates between Zim$ and US$.

In some parts of rural Zimbabwe, people were using gold as money, as Zimbabwe's mining is sufficiently undeveloped to allow some small-scale, low-tech gold mining by locals.

http://www.guardian.co.uk/world/video/2009/feb/11/zimbabwe-gold-panning-starvation-food

Of course, the Grauniad saw this as people being 'reduced' to panning for gold, as if it weren't a legitimate form of value-adding labour.

PeaBird's picture

Shouldn't be too hard to calculate. Just look at the price of gold in US$ for the two dates, and then look at the exchange rates between Zim$ and US$.

It's just a maths exercise though, cos' no one accepted it, since the hyperinflated Zim dollar did not exist as that entity after the 1st August 2008, as it had been redenominated 10 billion old Zim dollars to 1 new Zim dollar. Then on 13th Sept 2008, no one accepted Zim dollars as the Zim economy had been 'dollarized', and only foreign currencies & gold were accepted. But what the heck, here goes a maths attempt:

Price of gold around 22nd Oct 2008 was about US$750/oz, and according to this chart: http://upload.wikimedia.org/wikipedia/commons/3/3e/ZWDvUSDchart.png, 1 US dollar was about (10 to the power of 16) Zim dollars around Oct 2008.

So, 750 x (10 to the power of 16) Zim dollars per oz of gold around late Oct 2008. This is still meaningless though since you really can't make this transaction, as gold would not be offered for Zim dollars.

In fact, the most ironic statement from the wikipedia link about the Zim dollar hyperinflation is:

This reflected the reality of the dollarization of the economy

I've bolded the relevant bits from wikipedia: http://en.wikipedia.org/wiki/Zimbabwean_dollar

Introduction of the third dollar

Reserve bank governor Gideon Gono announced on 30 July 2008 that the Zimbabwean dollar would be redenominated.[14] Effective August 1, 2008, ZW$10 billion would be worth ZW$1; the new currency code was ZWR.[14] The planned denominations to be issued are coins valued Z$5, Z$10 and Z$25 and banknotes worth Z$5, Z$10, Z$20, Z$100 and Z$500.[15] While the German firm of Giesecke & Devrientwas no longer printing Zimbabwean currency, The Daily Telegraph reported that the new currency was printed before the relationship was severed and had been kept in storage since then.[16]

Due to frequent cash shortages and the worthless Zimbabwean dollar, foreign currency was effectively legalised as a de facto currency on 13 September 2008 via a special program to officially license a number of retailers to accept foreign money.[17] This reflected the reality of the dollarization of the economy, with many shop keepers refusing to accept Zimbabwe dollars and requesting U.S. dollars or South African rand instead.[18][19] Despite redenomination, the RBZ was forced to print banknotes of ever higher values to keep up with surging inflation, with ten zeros reappearing by the end of 2008 (see below).

tmosley's picture

This is what people are forced to resort to when no-one will take your crappy currency in exchange for their metals.

umop episdn's picture

Try some of this Zimbabweian Strong Stocks Drink. If you can swallow it, you will think you are richer every time the stock market goes up. Otherwise, stick with PMs. (I guess the US LOLlar is no longer an option for them.)

packman's picture

I don't get the point of equities to protect against hyperinflation instead of precious metals and alternate currencies.

Conjecture on my part, but I'd be willing to bet that even the above-average-Zimbabwean simply didn't have access to PM's or alternate currencies, or to real estate or even other commodities, but did have the ability to buy stocks.

Money often follows the path of least resistance.  Sometimes prices go up on something just because it's really easy to get.

(Like houses in the U.S. 1997-2007.)

 

FullMetalJacket's picture

If all currencies are depreciating (like now) then shares are a better play, although not as good as PMs.

hedgeless_horseman's picture

once a regional breadbasket

If only the white minority could have put all the natives on reservations, like America did, and slaughtered any that rebelled, like America did, then things might be different.

Quinvarius's picture

Instead they were the first to be eaten.

hedgeless_horseman's picture

...or worse.  The UDI occurred about 100 years too late to succeed.  So it goes. 

tmosley's picture

Nice job on the collective guilt there, dingus.

hedgeless_horseman's picture

Don't you think Mugabe would be better suited for running a reservation casino (like Native Americans in America) rather than governing a nation?

Sorry about any guilt, but the hypocrisy should be remembered, no?

FEDbuster's picture

With his experience he could be Federal Reserve Chairman instead of Benny "Bubbles" Bernanke the bankster's best buddy:

http://www.youtube.com/watch?v=vdED3rVgIu4

"I will try again to blow a bubble that will last all day!"

tmosley's picture

The whites didn't steal the land.  Any farmers in that area either bought or homesteaded those lands.  The MINES were stolen, but they weren't in private hands anyways, and Mugabe's government inherited all of those anyways.

Even if that land had been stolen by the whites, it was generations ago.  Why do innocnets have to pay for the crimes of their grandfathers?  Further, the land was NOT returned to its original owners.  It was simply appropriated from a person based on their skin color, and given to someone else based on their skin color and their status within the Mugabe clique.  

So you can fuck off with your white guilt bullshit.

hedgeless_horseman's picture

Your reading comprehension can use a little work.  

I did not say the whites stole anything.  I am merely attempting (maybe poorly) to illustrate the hypocrisy of the American government not recognizing Rhodesia because she took actions far less acrimonious than America took against her own natives. For more on Yankee hypocrisy cross reference America's claim that China is a currency manipulator with yesterday's $600,000,000,000 of manipulation.

Any guilt is your own, friend, not my production. 

Lucky Guesst's picture

Lets see waterboard vs stone, temporarily enslave vs chop up.....hmmmm.

As far as Native Americans go, if they used the reservations to preserve their tribal ways (tee-pees, bow and arrows and genuine leather bikinis) then I would feel guilty. But since they build casinos, booze it up and live the same general way we do...... NOW THEIR BIGOTS! Where else on this planet do you get to have only your own race as neighbors?

Another group of people that want to close their own border AND cross every one elses!

trav7777's picture

wasn't a white minority by that point.  The Rhodesian natives were largely on reservations, called slums.  Didn't stop the diversity movement worldwide from trashing the country completely just to make sure it had majority rule.

If majority rule leads to this, of what use is the majority?

hedgeless_horseman's picture

wasn't a white minority by that point. 

Whites never comprised more than 5% of the country's total population, but up to 1979 they never had less than 95% of the total vote in national elections.  http://en.wikipedia.org/wiki/Rhodesia

If majority rule leads to this, of what use is the majority?

When majority rule (Democracy) defeats the Rule of Law (Republic) the result is usually a Mugabe, no matter how politically correct the individual case may be.  http://www.youtube.com/watch?v=KFXuGIpsdE0

Plan accordingly, friend.

FunkyMonkeyBoy's picture

Er, there is a difference, the $US dollar is the worlds currency (all major commodities are priced in $dollars). If zimbabwe's currency goes through the floor it only really affects Zimbabwe and neighbors at most. If the $US dollar goes through the floor it affects every part of the world and has severe reprocussions, i.e oil-price.

macholatte's picture

Therefore: no more reserve currency status for USA

 

from wikipedia

The North American Currency Union is a theoretical economic and monetary union of three North American countries: Canada, the United States and Mexico.


Map of a theoretical NAU, with Canada, Mexico, and the United States

Implementation would involve the three countries giving up their current currency units (U.S. dollar, Canadian dollar, and Mexican peso) and adopting a new one, created specifically for this purpose. (Some versions of the theory, particularly those circulating in Canada, assume only the United States and Canada would be included.) The hypothetical currency for the union is most often referred to as the amero.[1][2] The concept is modeled on the common European Union currency (the euro), and it is argued to be a natural extension of the North American Free Trade Agreement (NAFTA) and the Security and Prosperity Partnership of North America (SPP).

Conspiracy theorists contend that the governments of the United States, Canada, and Mexico are already taking steps to implement such a currency, as part of a "North American Union (NAU)".[1][3]

 

BigJim's picture

They've been talking about this for years... is there any reason to believe it's closer to realisation?

packman's picture

...the $US dollar is the worlds currency...

A big word, those two letters.

cossack55's picture

A bigger word......WAS.

MachoMan's picture

still is, but slowly giving way to PMs.  It will be the last fiat standing...  not that it's much of a consolation prize.

aaronb17's picture

Well, yeah, but the USD is also priced in other currencies.  If the USD falls and oil rises, it's kind of a wash. 

For example, an ounce of gold was around $1540AUD in June, 2010.  Now it's only $1350AUD.  Despite devaluation of the dollar, and rising gold prices in dollars, the gold price appears to be falling in AUDs.

Of course, it's not, because the AUD has just been appreciating faster than gold against the dollar and other currencies and gold.  When the AUD slows its ascent, gold is probably going to rocket up in that currency.

SheepDog-One's picture

Right, we're not talking about some small country in Africa, its the worlds reserve currency theyre trashing. All boats sink.

macholatte's picture

Yes, of course, as of today. But think it through to a conclusion based upon information that we have today. That information is the trend that has been stated repeatedly ---> massive printing of USD = massive devaluation of USD relative to commodities. As someone pointed out, the cost of commodities in native currencies, such as the Aussie, is a push because the Aussie appreciates against the dollar.

So the question is this: Does such policy by the reserve currency cause hardship abroad? If yes, then how long do you expect other countries to put up with it? Is it a prelude to war? Is the simple answer to make something else the reserve currency so other countries can cut themselves loose (decoupling) from the US Titanic?

 

 

 

MachoMan's picture

The reason our printing policy has persevered here is because, ultimately, it permeates every aspect of our economy and creates unwitting accomplices to the printing.  Likewise, our printing policy has permeated foreign sovereigns, who in response have gone "all in" on the dollar. 

I expect them to tolerate it until they cause the bitter end (which is far longer than most have guestimated so far and I suspect will continue to be so)...  it means their own demise as well...  but sometimes, death is the preferred option.  (presuming they don't beat us to the punch, we'll repudiate our debt, effectively causing the same outcome).

FEDbuster's picture

Now as we move to DOW 35,000 and beyond as measured in worthless paper FRN's the wealth effect that Benron has bet our future on will be an epic fail.  Those not playing the stock market game will not benefit, yet they will still have to pay $10/gal for gas and milk.  Wages (for the few who still have jobs) will not keep up with the real inflation.  Those on fixed incomes from bonds and "inflation" tied benefits are dead in the water.

Most here knew it would come down to hyperdeflation or hyperinflation.  The hyperinflation fix is in and a Zimbabwe outcome is assured.  Benron will fill the debt hole with worthless paper to be given to worthless politicians to spend on worthless programs.

Time to add more garden seeds and fertilizer to the Christmas list.  Starvation will be a bitch.

packman's picture

Man, there was some serious, serious money being made then.

(Too bad the money itself was actually worth zilch)

Calls and Putz's picture

If the dollar goes to zero, stocks go to infinity and investors are still broke.

cowdiddly's picture

Newsflash. Ben Mugabe just seen boarding a Zimbabwe Air jet. 

firstdivision's picture

The market surge was noted by ZH back at the end of 2009. http://www.zerohedge.com/article/zimbabwe-stock-exchange-look-things-come

 

Some one needs to forward this article to all our newly elected officials.  Let us see if real change will occur or not.

SheepDog-One's picture

DOW up 1%, gold up 3.2%, game over. Thats gold up 40$ this morning, wow.

chunkylover42's picture

the dollar is just getting kicked in the nuts today

faustian bargain's picture

kitco website is down...ben's nervously reloading the web page 1000 times a second.

Dan Duncan's picture

Yes, I'm interested in learning more about your 10 Second TIPS product.  Must I hold this security until maturity, or can I sell it prior to the same on the open market? 

Thanks!

wafflehead's picture

where are all the "sell the news" people??? i am still waiting for the market to drop! lolz