Zimbabwe stocks shrug off election jitters

HARARE (Reuters) - Zimbabwean stocks jumped to an all-time high this week, disregarding a political stalemate over delayed results of the country's presidential election nearly two weeks after the poll.

The Zimbabwe Stock Exchange (ZSE) has long defied economic fundamentals and political volatility, offering investors one of the few remaining ways of keeping ahead of inflation, which at an annual rate over 100,000 percent is the highest in the world.

By Wednesday, retailer Edgars' stock had risen by 90 percent over the past week to ZW$3.8 million. The Kingdom Meikles Africa group gained 67 percent to ZW$100 million and Rio Tinto Zimbabwe was 47 percent up, to ZW$250 million, over the same period.

The ZSE's benchmark industrial index gained 36 percent last week, as official results showed President Robert Mugabe's ruling ZANU-PF lost control of parliament for the first time in his 28 years in office.

The opposition Movement for Democratic Change (MDC) has accused Mugabe of delaying the results in a bid to find a way out of the biggest challenge to his rule.

The ZSE industrial index again rose 32 percent between Monday and Wednesday to reach a peak of 19 billion points, despite fears of rising political tension over the delays in results. The index did come off its peak on Thursday, falling six percent, to 18.175 billion points.

It is difficult to estimate inflation over the week, against which to compare the stock market's rise. However, the Zimbabwe dollar, whose official rate is pegged, fell 37.5 percent on the black market over the past week against the U.S. dollar.

The MDC, which claims its leader Morgan Tsvangirai won the presidential vote outright without needing a runoff, has sought a court order compelling the Zimbabwe Electoral Commission (ZEC) to release the results. A ruling will only be made on Monday.

Analysts say the stock market movement suggested investors had overcome the election jitters.

"It seems to imply investors may have discounted the current political uncertainty emanating from the continued delay in the announcement of the presidential election results," Innocent Mafumhe, an analyst with Kingdom Stockbrokers wrote in an investor note.

"The continued existence of negative real investment rates emanating from lower nominal investment rates and hyperinflation is one issue that continues to favor investment in non-interest bearing assets such as stocks."

Some analysts say the ZSE, whose market capitalization was estimated around $3 billion at the end of March, was seen by many investors as a safe bet, regardless of the poll outcome.

Washington Mehlomakhulu of Highveld Financial Services said if Mugabe is re-elected after an expected runoff, inflation was likely to surge further.

The stock market would remain one of the few investment options guaranteeing real returns.

"Change almost certainly means the return of international investment and asset price stabilization," Mehlomakhulu said.

"The stock market, either way, will still be a viable option. Different scenarios, but almost similar outcomes. It's an irrational market."

Improved foreign investment would, however, provide an immediate lift for the property, construction and tourism sectors, Mehlomakhulu said.

The current ZSE rally continues to be led by heavyweight foreign-controlled counters such as Old Mutual, Pretoria Portland Cement, Delta Corporation and mining firms Rio Tinto Zimbabwe and Falgold.

(Editing by Rory Channing)