UPDATE 3-Zimbabwe stock market plunges after Mugabe victory
* Bourse re-opens after Mugabe landslide, shares plummet
* Fears Mugabe may accelerate foreign company takeovers
* Concerns also about return to Zim dollar (Adds U.S. ambassador, Botswana comments)
By MacDonald Dzirutwe
HARARE, Aug 5 (Reuters) - Zimbabwe's stock market plunged on Monday, the first trading day since President Robert Mugabe was re-elected, reflecting investor concerns he might target foreign-owned businesses or stop using the U.S. dollar.
The bourse's Industrial Index fell 11 percent, a dubious market reaction to the landslide win by Mugabe and his ZANU-PF party whose economic policy centres on the "indigenisation" of foreign firms - forcing them to cede majority control to local blacks.
Nine of the top 10 companies on the $5 billion bourse fell, and the biggest, Delta Corporation, the local unit of global brewer SAB Miller, lost 20 percent to trade at $1.20 a share.
Before the July 31 election, the index hit a series of highs on hopes Prime Minister Morgan Tsvangirai might unseat the 89-year-old Mugabe at his third time of trying.
Instead, Mugabe, Africa's oldest head of state, won a crushing 61 percent in the presidential vote and a huge majority in parliament that allows ZANU-PF to change the constitution at will.
Tsvangirai has dismissed the poll as a "farce" and his Movement for Democratic Change (MDC) party is preparing a legal challenge to what it says was massive vote-rigging, although analysts say a court bid is unlikely to succeed.
There has been no sign yet of the violence that followed the last election in 2008 when 200 MDC supporters were killed.
Even without unrest, investors fear an emboldened ZANU-PF could accelerate its indigenisation programme by targeting foreign banks that it says are refusing to lend money to black farmers and small businesses.
"These are initial shocks in reaction to the election results. It was going to happen - maybe until there is some certainty on the policy front from the new government," a trader with a local stockbroker said.
In an interview with Reuters, U.S. Ambassador Bruce Wharton said the eyes of the world would be on Mugabe's cabinet choices for clues as to his overall policy direction.
"I suspect a lot of potential investors want to know exactly where that (indigenisation) programme is headed," he said.
The MDC must lodge its legal challenge by Friday and the constitution says the courts must rule on the case within 14 days. Only after the all-clear can Mugabe be sworn in.
The election has left the 14-year-old MDC, the only serious challenge to Mugabe's 33-year hold on the former British colony, in tatters.
"Of all our experience, nothing could have prepared us for the 2013 election and the systematic and scientific dismembering of the people's wishes," party Secretary General Tendai Biti, the outgoing finance minister, wrote on his Facebook page.
Biti's exit casts doubt over the future of a recovery he helped engineer after a decade-long crisis marked by 500 billion percent inflation, bare supermarket shelves and tens of thousands of Zimbabweans fleeing destitution to neighbouring countries.
The rot only stopped when the 15-nation Southern African Development Community (SADC) forced Mugabe and Tsvangirai into a power-sharing government in 2009 that made scrapping the worthless Zimbabwe dollar one of the first things it did. The country currently uses the U.S. dollar and South African rand.
SADC has given general approval to the election, but Botswana, a tiny but vocal critic of Mugabe, said the way it was conducted was unacceptable.
In the staunchly pro-MDC capital Harare and the second city of Bulawayo, most people went about their business as normal but remained shocked at the size of Mugabe and ZANU-PF's victory.
"I never thought I would consider looking for a job outside Zimbabwe but after the weekend, dusting off my passport has become an option," said Nixon Mkwananzi, a clerk at a foreign-owned bank in Bulawayo.
Eurasia Group, a political risk consultancy, said the results dashed any hopes for more liberalisation, but did not necessarily mean a return to the chaos of the early 2000s, when pro-ZANU-PF militias overran white-owned commercial farms and the central bank printed money on an industrial scale.
Many Zimbabweans fear reintroduction of the Zimbabwe dollar, a possibility alluded to by Mugabe and senior ZANU-PF official Patrick Chinamasa, who called the 2009 move to the U.S. currency a "strategic retreat".
"I hope they don't dare do that. That would be the end for this country," said newspaper vendor Oswald Jani. (Additional reporting by Cris Chinaka; Editing by Ed Cropley and Robin Pomeroy)