ZSE changes its index composition

The Zimbabwe Stock Exchange (ZSE) has published its first-quarter 2026 index compositions, revealing a market that analysts say is becoming increasingly concentrated, defensive and structurally smaller, despite limited headline changes among top-listed counters.

The latest review covers several indices, including the Top 10 and Top 15, which are used as benchmarks to track aggregate market movements against a stable base period. While the names at the top remain largely familiar, a closer reading of the data points to declining market breadth, fewer liquid anchors and rising concentration risk.

According to the Q1 2026 figures, just three counters now account for more than 70 percent of the underlying value in the Top 10 Index, underscoring the dominance of a narrow cluster of large companies. This heavy concentration has persisted from previous periods but has become more pronounced between Q1 2025 and Q1 2026.

Market observers say the changes reflect not organic growth, but a structural contraction of the listed space, as fewer large counters are left to anchor market capitalisation.

In the Top 10 Index, the most notable changes are the exit of Ecocash Holdings, following its restructuring, and Hippo Valley Estates. These were replaced by First Mutual Properties and Tigere Property Fund REIT.

The shift signals a growing investor preference for property-backed and yield-oriented instruments, as opposed to operating businesses driven by earnings growth. Analysts attribute this to tighter liquidity conditions and relative inflation stability, which have pushed investors toward defensive, asset-backed counters.

The Top 15 Index reflects a similar trend. While most constituents were retained, the absence of ZB Financial Holdings and Ecocash in 2026, alongside the inclusion of African Distillers and Meikles, suggests re-ranking driven more by market capitalisation compression than by broad-based sectoral expansion.

Financial services names appear less dominant at the upper end of the indices, while property, tourism and select consumer stocks have maintained relevance largely due to balance sheet resilience rather than strong earnings momentum.

"These observations reinforce the reality that index stability is being achieved through reweighting within a shrinking pool, rather than through new listings or genuine market expansion," an analyst noted.

The broader market contraction was further illustrated by the delisting of National Tyre Services (NTS) during the period. The exit has been linked to sustained erosion of formal sector demand, as SMEs and the informal economy increasingly dominate key value chains.

Analysts say this trend highlights how economic informalisation is directly hollowing out the listed corporate space, reducing the depth and diversity of the ZSE.

One of the most consequential dynamics remains the continued inclusion of Econet Wireless Zimbabwe in both the Top 10 and Top 15 indices, despite its imminent exit from the ZSE.

While Econet is still ranked among the largest counters by historical market capitalisation, its ongoing inclusion is increasingly seen as distorting index representativity and investability.

Once Econet exits, analysts warn that index concentration will intensify further, liquidity will thin, and dominance by a small cluster of banking, property and consumer names will deepen. Passive and benchmark-tracking portfolios are also expected to face forced rebalancing and short-term volatility.

As market capitalisation becomes concentrated in fewer stocks, index performance is now driven by a handful of heavyweight counters, reducing the usefulness of indices as a broad measure of market health.

Strong index readings, analysts caution, may increasingly reflect gains in one or two dominant names rather than a general uplift across the market. This divergence between headline index performance and the experience of the median stock has widened over the past year.

For investors, this clustering effect raises idiosyncratic risk, as adverse developments in a small number of dominant counters can disproportionately affect index-linked portfolios.

In this environment, analysts say stock selection, sector exposure and balance sheet quality matter more than index momentum.

"In a contracting and concentrated market, indices still provide context, but fundamentals are what drive returns," one market watcher said.

Overall, the Q1 2026 index changes are being read as early warning signals of a market struggling to replenish itself, increasingly reliant on defensive assets and vulnerable to further shrinkage unless new listings, credible capital raising and private-sector growth return to the exchange.