From January to date, the equities market of the Lusaka Securities Exchange has had 49.9 million shares being traded with a turnover of K 109.40 million. The chart below provided by Financial analytics Zambia, reveals that although trading performance was weak in 4 out of the first 6 months of 2019, the second half of the year is showing signs of a ‘bullish’ run.
The Corporate bond market on the other hand has had K3.850 billion in sales in 681 trades since the beginning of the year. Bond trading has however tapered following the Q1 out-performance that has remained unmatched to date.
Liquidity constraints remain the key reason why bond performance has weakened over the last couple of months. With inflation on the rise, after the August 2019 Central Statistics announcement of an acceleration to over 9%, the outlook for capital raising through corporate bonds looks bleak.
Inflows in domestic capital market trading from international participants has also been low despite yields up to 25%. This is the surprising fact about emerging markets that are at the moment surpassing first world country yields. For example, Europe is now seeing ubiquitous negative yields on long term bonds. However, rational investor confidence on EMs continues to be motivated by the fear of default with country credit ratings continue weaken. Worst still, with accelerating inflation as in the case for Zambia, holding local paper in the medium term does present some risk.