HARARE - Zimbabwe's moribund economy is slowly stirring, with signs of life in once-shuttered businesses helping to revive a stock market that was closed amid a scandal last year, analysts say.

HARARE - Zimbabwe's moribund economy is slowly stirring, with signs of life in once-shuttered businesses helping to revive a stock market that was closed amid a scandal last year, analysts say.

Hammered by world-record hyperinflation, the Zimbabwe Stock Exchange was shut down last November as the central bank sought to curb traders using dud cheques as well as activities of market speculators.

Trading resumed in February, after the local currency was abandoned and a unity government was formed between President Robert Mugabe and his long-time rival, Prime Minister Morgan Tsvangirai.

Since then the value of monthly trade is up 20-fold, though that's coming off a base of just US$2,5million (about R18million). ZSE boss Emmanuel Munyukwi said that there's still signs of at least cautious optimism in the country.

"This is a sign that confidence is coming back to the bourse when compared to last year," he said.

"There has been huge interest on our counters. Most of the buyers are foreigners, especially from South Africa and United Kingdom."

Monthly trading peaked in June at US$57million (about R421million) but has since slowed. Munyukwi expects this month's figures to register around US$50million (about R370million).

Without a local currency, trading is now conducted in US dollars, limiting currency risks for foreign investors, Munyukwi said.

That's brought stability to a market ravaged by inflation estimated in multiples of billions last year, said Dzikamai Danha, an analyst with Renaissance Capital, a Russia-based company that tracks emerging markets.

"The real reason why the economy has stabilised and the real reason why the stock exchange has had a fine rally... is as a result of confidence in the use of the US dollar, which does not fluctuate like the Zimbabwe dollar," Danha said.

"Last year, the ZSE in terms of business was actually smaller to that of Botswana, Malawi and Zambia," some of the world's smallest markets, he said.

Danha expects ZSE market capitalisation to be US$4,1billion (about R30billion) by year end, representing a 138percent increase over the quarter ending in June, but still tiny even compared to neighbouring South Africa's bourse.

Significant political risks remain, as Mugabe and Tsvangirai publicly feud over key appointments, including the naming of the central bank governor.

"Although the political noise surrounding these disagreements has intensified in recent months, we do not believe any break in the government is imminent," Danha said.

But Jonathan Waters, analyst at the economic and financial data group ZFN, said that despite the gains this year, the market remains far off its historic peaks.

The ZSE had a market capitalisation of about US$9billion (about R66billion) in mid-1997, before inflation began surging.

Last year at the height of the hyperinflation, the market was capitalised at about US$4billion (about R29billion), against US$3,5billion (about R25billion) last week, he said.

"So in fact it's gone backwards," Waters said.

But as companies adjust to doing business in a dollarised economy, some are performing surprisingly well, while foreign investors have begun returning to Zimbabwe, he said.

"Between 50 to 150 million dollars has certainly come into the country" this year from foreign investors, Waters said, adding that banks had performed well in their first quarterly results under the new financial regime.

"Our first dollarised results for the period to June have just been released, and we have been surprised by the performance of the banks," he said.

Although 79 firms are listed on the ZSE, 10 dominate trading - most of them local subsidiaries of banks such as Barclays and Old Mutual, as well as local telecom Econet. - Sapa-AFP