Zambia's Capital Market Performance - H1 2026

ZAMBIA'S CAPITAL MARKET PERFORMANCE - H1 2026

For a country that spent years fighting its way back from sovereign default, the first half of 2026 read like vindication. The Lusaka Securities Exchange didn't just recover — it soared, ranking as the world's second-best performing stock market in January and holding that momentum all the way through June.

What changed? Start with the basics: inflation, once running hot at 11.2%, cooled to a comfortable 6.5% by June — squarely inside the Bank of Zambia's target zone. The Kwacha did its part too, rallying an impressive 13.3% against the dollar in Q1 alone. Add a central bank trimming interest rates, a government that successfully restructured 94% of its debt, and an economy growing at 7.7% (nearly double the previous year's pace), and you have the ingredients for genuine investor confidence — not just optimism on paper.

The equities market told the story best. Market cap climbed to K341.9 billion, investor numbers jumped 11% to 92,000, and share prices for companies like Networks Zambia (+122%) and ZAMEFA (+100%) turned heads well beyond Zambia's borders. Zambia Sugar joined the billion-dollar club, standing alongside Copperbelt Energy and ZCCM-IH as the exchange's third company to cross that threshold.

Bonds weren't left out of the celebration either. When the Bank of Zambia offered K4.2 billion at a January auction, investors came knocking with over K9 billion in bids — more than double what was on the table.

Still, the second half of the year won't coast on goodwill alone. The IMF has flagged election-year spending pressures, and global fuel prices and geopolitical jitters could nudge inflation back up. The real test now falls to whoever takes office after August's elections: can Zambia keep the discipline that got it here?

For now, though, H1 2026 stands as proof that when the fundamentals align, Zambia's markets can compete with the best in the world.

— by Fabian Chewe, Excel Magazine Issue 14

BY FABIAN CHEWE

A Market Transformed by Stability

The first half of 2026 represented a watershed period for the Zambian capital market, transitioning from a recovery phase to a phase of robust, fundamentals-driven growth.

Investor sentiment was profoundly reshaped by a confluence of positive macroeconomic factors: a dramatic return of inflation to the central bank's target band, a significant appreciation of the Kwacha, a stable monetary policy environment, and a strong economic growth outlook. The Lusaka Securities Exchange (LuSE) delivered an exceptional performance, ranking as the world's second-best performing stock market in January and maintaining strong momentum through June.

This positive trend extended across asset classes, with the equities market showing broad-based gains, and the bond market experiencing unprecedented demand. This analysis provides a deep dive into the performance of Zambia's capital markets in H1 2026, exploring the key drivers, sectoral performances, and the outlook for the remainder of the year.

The Macroeconomic Backdrop-The Engine of Growth

The resurgence of Zambia's capital markets in H1 2026 is inextricably linked to a profound improvement in the country's macroeconomic fundamentals.

Inflation Tamed: Perhaps the most significant development was the decisive deceleration of inflation. From a high of 11.2% in Q4 2025, inflation declined sharply to 7.1% by the end of Q1 2026, and further to 6.5% by June, bringing it squarely within the Bank of Zambia's 6-8% target band. This disinflationary trend was supported by a strong Kwacha and moderating food prices, restoring predictability to the economic environment.

Kwacha Strength: The Zambian Kwacha experienced a remarkable rally, appreciating by approximately 13.3% against the US dollar in the first quarter alone. This appreciation, driven by improved foreign exchange inflows and a positive shift in market confidence, was a critical factor in taming inflation and making Zambian assets more attractive to foreign investors.

Monetary and Fiscal Prudence: The Bank of Zambia's (BoZ) decision to reduce the monetary policy rate from 13.50% to 13.25% signaled confidence in the improving inflation outlook and contributed to a more accommodative financial environment. Furthermore, the government's commitment to fiscal consolidation, highlighted by the country emerging from its sovereign default and the successful restructuring of approximately 94% of its debt, sent a powerful signal to investors, restoring credibility and attracting significant interest.

The macroeconomic stabilization was underpinned by strong economic performance. The economy expanded by 7.7% in the first quarter of 2026, compared to 4.5% in the same period of 2025, driven by robust growth in agriculture, information and communication, and wholesale and retail trade.

Equity Market Performance: A New Era for the LuSE

The equity market was the standout performer in H1 2026, characterized by a significant increase in market capitalization, a broadening investor base, and spectacular returns for several listed companies.

Market Size and Participation: The LuSE's total market capitalization grew from approximately K330 billion in Q4 2025 to K341.9 billion in H1 2026. More importantly, the number of investors in the equities market grew by an impressive 11%, from roughly 83,000 to 92,000, signaling a widening of market participation beyond institutional players. The LuSE All Share Index (LASI) rose by 5.29% to close at 27,289 points by the end of Q1 and sustained its strong performance into June. This momentum was reflected in strong equity turnover, which exceeded K120 million, with more than 13 million shares traded.

Benchmarking and Global Recognition: In January 2026, the LuSE was recognized as the world's second-best performing stock market, with a nearly 17% gain in US dollar terms, leading the African continent and trailing only Bulgaria. This global recognition cemented the LuSE's status as a leading frontier market, attracting significant international attention.

Exceptional Stock Performances: The rally was not confined to a few sectors but was notable for its breadth. A number of companies delivered extraordinary returns to shareholders in H1 2026.

Early Q1 leaders like ZANACO (+62.88%), ZAFFICO (+40.06%), Bata Zambia (+28.48%), and Airtel Zambia (+27.06%) also contributed significantly to the strong sentiment.

The performance of Zambia Sugar was a landmark event, as it became the third listed company on the LuSE to surpass a market capitalization of one billion US dollars, joining Copperbelt Energy and ZCCM-IH.

Bond Market and Investor Sentiment

The fixed-income market mirrored the buoyant sentiment in the equities market, with demand for government securities reaching new heights.

Government Bond Auction: The auction held on January 23, 2026, was a clear demonstration of renewed investor confidence. The Bank of Zambia offered K4.2 billion in bonds, but received bids totaling a staggering K9.07 billion, more than double the amount on offer, highlighting a strong appetite for government paper. The central bank ultimately allocated K5.39 billion, with the strongest demand concentrated in the 5-year, 7-year, and 10-year maturities, where cut-off yields ranged between 14.90% and 18.79%. This oversubscription reflected a positive shift in risk perception regarding Zambia's sovereign debt.

Government Securities Issuance: In a sign of fiscal strategy, the government significantly scaled up its domestic borrowing posture. Bond auction sizes in Q1 2026 were increased to K4.2 billion, a 133% increase from K1.8 billion in Q1 2025, while Treasury bill auctions remained unchanged at K2.2 billion. This strategy demonstrates the government's ability to successfully tap domestic savings for its financing needs.

Corporate Bonds: While the government bond market attracted the most attention, corporate bond activity also showed interesting developments. In Q1 2026, institutions from the microfinance sector dominated corporate bond issuance, indicating a move towards formal capital market financing by non-traditional sectors.

Market Developments, IPOs, and Outlook

The positive momentum in H1 2026 was further underpinned by strategic market development initiatives and a promising pipeline of new listings.

Infrastructure and New Listings: The LuSE, under CEO Nicholas Kabaso, is actively working to simplify listing rules to ease market access and attract a broader base of issuers and investors. The successful listing of Klapton Reinsurance in March 2026 was a welcome addition, and the planned IPO of Zamtel later in the year is expected to open the telecommunications sector to wider citizen participation. Furthermore, the planned launch of a gold-linked ETF aims to tap into the precious metals rally, offering investors a new asset class and further deepening the market.

Looking Ahead: A Balanced Outlook

Strengths: The outlook for the Zambian capital market in the second half of 2026 is cautiously optimistic. The key strengths are clear: the successful restoration of macroeconomic stability, a credible debt restructuring process, strong GDP growth (forecast at 4.3% for 2026), and a booming copper sector that continues to attract significant foreign investment. The market cap-to-GDP ratio (including Shoprite) reached 51.6% in Q1 2026, showing positive progress towards the Capital Markets Master Plan target of 30%.

Risks: However, the path ahead is not without risks. The IMF has flagged fiscal pressures that intensified in 2026 due to pre-election spending and expenditure overruns, projecting the primary surplus to decline to 1.1% of GDP. Furthermore, rising global fuel prices and geopolitical tensions (such as the war in the Middle East) could push inflation back up to 8.5% by year-end, potentially reversing some of the gains made in H1.

The key challenge will be for the incoming government, following the August 2026 elections, to maintain fiscal discipline and continue the reforms that have restored investor confidence.

In conclusion, the first half of 2026 was a period of remarkable resurgence for the Zambian capital market. Solid macroeconomic management restored investor trust, fueling a rally in both equities and bonds. While challenges remain, the foundations laid in H1 2026 position the market for continued growth, contingent on navigating the fiscal and geopolitical headwinds in the second half of the year.