Stimulus packages have birthed a new wave of optimism particularly in developed countries America’s shopping malls are filled with people splurging stimulus cheques whilst cinemas in Britain are packed once again According to the Economist, a spending bonanza is just beginning given that capital spending amongst American companies is rising at an annual rate of 15% American GDP growth is also expected to outpace that in the emerging world in 2021; with the pandemic still ravaging places like Brazil and India
Poor-country growth is expected to lag even further behind The pandemic is also set to reshape the global economy in ways that make continued convergence towards rich-world incomes tougher As some point, global economists once reckoned that incomes in poorer economies would naturally catch up to those in richer ones, based on experience in Europe in the 19th and early 20th centuries, when industrial laggards caught up with Britain Given a trend of high growth in developed countries and the increased attraction of global equities, the big question is whether we should expect increased portfolio and foreign direct investment flows in frontier markets such as Zimbabwe
We note that the economic recession that Zimbabwe experienced in 2019 following the passage of cyclone Idai and a severe drought culminated to poor performance in terms of foreign direct investment (FDI) According to the UNCTAD’s 2020 World Investment Report, FDI inflows decreased significantly to US$280m in 2019, compared to pre-crisis period (US$745m in 2018) This trend has also been prevalent on the capital markets in Zimbabwe Foreign investor participation on the local bourse has waned as most portfolio investors have been divesting from Zimbabwean equities
Unsurprisingly, we are now witnessing a shift in terms of dominant participation on the equities market as local institutional and retail investors have seized the opportunity and are taking positions in local companies Retail investors have also been part of the band-wagon after the introduction of online trading platforms such as C-Trade and ZSE Direct A stabilisation in the exchange rate and slowdown in inflation figures also appears to have instilled a sense of confidence on the markets This optimism has also been triggered by several possible outcomes in 2021 such as;
Source: Business Times
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Source: Businesstimes
