The revelation that Zimbabwe's stock market plunged 99%.

The 99% plunge in Zimbabwe's stock market was mainly caused by the following factors:

1. Currency reform: Zimbabwe launched a new gold-backed currency, Zimbabwe Gold Coin (ZiG), on April 5, 2024, as an attempt to combat high inflation and stabilize the country's economy. However, the reform did not restore confidence as expected, but instead caused panic in the market, causing the stock market to fall sharply in a short period of time.
2. High inflation: Zimbabwe's high inflation rate is one of the root causes of the stock market crash. The Zimbabwean dollar had already depreciated by more than 80% that year, and this extreme currency depreciation had exacerbated market instability. The rise and fall of the stock market is closely related to inflation, and in a high inflation environment, investors' uncertainty about the future increases, which affects the performance of the stock market.
3. Lack of market reaction: Despite the central bank's attempts to stabilize financial markets by introducing a new currency, the market has not reacted positively. The uncertainty brought about by the introduction of the new currency, ZiG, coupled with the lack of market awareness of the new currency, led to a loss of investor confidence, further exacerbating the decline in the stock market.
4. Challenges in the economic context: In addition to currency reform and high inflation, Zimbabwe's economic challenges were also important factors in the stock market crash. These challenges, including liquidity difficulties and investor risk aversion, have interacted to lead to a sharp decline in the stock market.

The 99 per cent plunge in Zimbabwe's stock market is that while monetary reform is a means of solving economic problems, it needs to be implemented taking into account market acceptance and practical effects. In addition, high inflation has a far-reaching impact on the economy and the stock market, which needs to be effectively controlled through comprehensive measures. Finally, the government needs to fully consider the impact on market confidence and how to maintain the stability of financial markets while maintaining economic growth when adopting any economic policy.

What are the specific negative impacts of the introduction of Zimbabwe Gold Coin (ZiG) on the stock market?

The introduction of Zimbabwe Gold Coin (ZiG) has had the following negative effects on the stock market:

1. Stock market plunge: The Zimbabwe Stock Exchange's all-stock index has plunged 99.95% since Zimbabwe launched its new gold-backed currency, Zimbabwe Gold Coin (ZiG), on April 5, erasing the stock market's more than 330% growth this year.
2. Liquidity challenges: Exchanges and brokerage firms face liquidity challenges. This indicates that the introduction of new currencies has led to a decrease in liquidity, affecting the normal functioning of the market.
3. Drop in trading volume: The data shows that there was a significant drop in trading volume in the two weeks leading up to the currency conversion. This reflects the decline in confidence among market participants, as well as concerns about the acceptance of the new currency.
4. Black Market Exchange Rate Volatility: The Zimbabwean gold coin has seen a decline in its exchange rate on the black market, which has further weakened the value of the new currency and may have exacerbated concerns about the stability of the economy among investors and businesses.

The introduction of the Zimbabwe Gold Coin (ZiG) has led to a significant decline in the stock market, liquidity challenges, declining trading volumes, and instability in the black market exchange rate, all of which have had a significant negative impact on Zimbabwe's stock market.

What are the specific figures and reasons for Zimbabwe's high inflation rate?

The specific figures and reasons for Zimbabwe's high inflation rate are as follows:

1. Specific data:
2. In August 2022, Zimbabwe's inflation rate was 285.0% y/y, compared to 256.9% in July. Inflation came in at 12.4% m/m compared to 25.6% in July.
3. By May 2022, Zimbabwe's annual inflation rate had risen to 131.7%.
4. In July 2023, Zimbabwe's inflation rate dropped significantly to -15.3%.
5. In November 2023, Zimbabwe's annual inflation rate was 21.63%.
6. Cause:
7. Zimbabwe's high inflation rate is partly due to soaring domestic prices of cooking oil and bread.
8. Another reason for the high inflation rate is the high annual interest rate on commercial bank borrowing.
9. Zimbabwe pushed ahead with monetary reform to address high inflation, but this also led to a 99% plunge in the industrial index and a complete collapse of the economy.

In addition, Zimbabwe made changes to the methodology for calculating the inflation rate in 2023, which led to a significant drop in the inflation rate data, from 77.2% to 18.4%. This shows that in addition to external economic factors, domestic policy adjustments are also important factors affecting the inflation rate.

What measures has the Central Bank of Zimbabwe taken in monetary reform and how effective have they been?

The Central Bank of Zimbabwe has taken a number of measures in its monetary reform, including:

1. Since February 2019, the exchange rate between the US dollar and the bond currency has been adjusted through market means, and the official exchange rate of the two is no longer locked at 1:1.
2. In June 2019, Zimbabwe announced the abolition of the multi-currency system and replaced it with the new Zimbabwean dollar (RTGS dollar), which as of March 2020 was the country's only legal tender. Since then, Zimbabwe has once again used foreign currency.
3. On November 11 of the same year, the issuance of the new Zimbabwean dollar began, ending a decade without a local currency.
4. In June 2022, Zimbabwe raised interest rates to 200%.
5. In July 2023, the Central Bank of Zimbabwe (ZBV) achieved some effect in curbing inflation by issuing gold coins to reduce the market liquidity of the currency. So far, about 28,000 gold coins have been sold, with a total revenue of about $27.5 million.

How effective are these measures?

• As a result of these reforms, Zimbabwe's currency has stabilized and prices have continued to fall. The Herald newspaper reported that the local currency has steadily appreciated after experiencing massive inflation in May and June, as the Ministry of Finance and the central bank have implemented major reform policies. As the exchange rate stabilized and the cost of living fell sharply, the month-on-month inflation rate in July was -15%.
• However, despite these positive signs, the International Monetary Fund (IMF) said in February 2024 that Zimbabwe's currency continues to depreciate, calling for faster monetary reform. The IMF mission recommended that the authorities should shift to market-driven exchange rates and focus on addressing existing problems.

The Central Bank of Zimbabwe has taken a series of measures in its monetary reform, including adjusting the exchange rate, abolishing the multi-currency system, issuing new currencies, raising interest rates, and reducing market liquidity through the issuance of gold coins. These measures have stabilized the value of the currency and the price level to some extent, but they still face the challenge of currency depreciation and the need for further reforms.

What is the perception and acceptance of Zimbabwe's new currency?

Zimbabwe's new currency, Zimbabwe Gold Coin (ZiG), was introduced to stabilize financial markets and combat inflation, but investors' perception and acceptance of the new currency has shown a clear negative reaction. First, although the government wants to stabilize the economy by introducing the new currency, the delay in conversion in practice and the lack of understanding of the new currency in the market have had a negative impact on the stock market and brokerage business. This indicates that investors are cautious about the introduction of new currencies and are concerned about the uncertainties and risks it may bring.

In addition, the confusion about the value of the new currency is a direct consequence of the collapse of the Zimbabwean stock market, reflecting investors' concerns about the uncertainty of the value of the new currency and their reluctance to hold assets that may depreciate. This concern further exacerbated the panic in the market, causing the Zimbabwe Stock Exchange's all-stock index to plummet by 99.95% and the new currency to depreciate by 80% shortly after its launch. These data clearly show investors' distrust and fear of the new currency, as well as their doubts about the long-term stability of Zimbabwe's economy.

Although the governor of Zimbabwe's central bank said that the government has sufficient gold and foreign exchange reserves to support the value of the Singapore currency, and that the new currency is backed by a basket of assets, including foreign currencies, gold and other precious metals, these measures do not appear to have been effective in alleviating investors' concerns. On the contrary, investors' lack of awareness of the new currency and doubts about the stability of its value have led to a sharp decline in the stock market and a rapid depreciation of the value of the new currency.

Investors' awareness and acceptance of Zimbabwe's new currency is mainly manifested in worry, uncertainty and distrust. They were skeptical about the stability of the value of the new currency, fearing that it might depreciate, which led to a sharp drop in the stock market and a rapid depreciation in the value of the new currency.

In the face of economic challenges, what comprehensive measures has the Zimbabwean government taken to control high inflation?

In the face of economic challenges, the Zimbabwean government has taken a series of comprehensive measures to control high inflation. First, the government decided to continue with tight fiscal and monetary policies to control inflation. In terms of monetary policy specifically, the Reserve Bank of Zimbabwe raised its policy rate from 80% to 200% by 12,000 basis points, one of the largest cumulative rate hikes in the world. In addition, in order to cope with the challenge of economic slowdown, the government has strengthened the supervision and regulation of the economy, and stabilized the economy by adjusting monetary and fiscal policies.

In terms of specific measures, the Government of Zimbabwe has also taken measures including strengthening foreign exchange controls and issuing alternative currencies. For example, the central bank announced the launch of a new gold-backed currency, Zimbabwean gold, to replace the old currency for trading, with the aim of stabilizing the local currency and curbing rising inflation. In addition, the central bank has begun selling gold-backed digital tokens, providing investors with an opportunity to save and invest in gold.

These measures reflect the Zimbabwean government's proactive response to high inflation, through a series of comprehensive fiscal and monetary policy adjustments, as well as the introduction of innovative financial products, in an effort to stabilize the economy and control inflation.