• Zambia's stock index gained 14.3% in August and 56% YTD, driven by strong copper prices.
• Copperbelt Energy has maintained a market capitalization of over US$1.8 billion for over two months.
• The Kwacha rose 19%, boosting dollar returns to 84%, the second-highest in Africa, after Ghana.

The Lusaka All-Share Index, Zambia's primary stock market benchmark, has emerged as a top performer in Africa, driven by surging copper prices and robust corporate earnings. According to data from the African Markets platform, the index delivered a 14.3% return in August, marking the third-best performance on the continent.

Only Rwanda (+18.9%) and Malawi (+42.3%) posted higher gains, though on significantly smaller exchanges. This surge aligns with the high price of copper, Zambia's primary export. The metal's price is currently 39% above its three-year average. As the second-largest copper producer in Africa, Zambia's economy and stock market are vulnerable to fluctuations in copper prices.

In local currency terms, the Lusaka Securities Exchange (LuSE) has been on a strong run, climbing 56.6% since the start of the year. This makes it the top-performing primary stock market in Africa, having outpaced all key indices in Europe, the U.S., and Asia, according to data from Trading Economics.

Companies with direct exposure to the copper sector have spearheaded the rally. On Wednesday, August 27, ZCCM Investment Holdings, a major investor in the country's primary copper mines, crossed a $1 billion market capitalization. Copperbelt Energy Corporation (CEC), the primary power supplier to the mining industry, also surpassed this milestone, now boasting a valuation of $1.8 billion.

Excluding South African retail giant Shoprite, which is primarily listed on the Johannesburg Stock Exchange, the Zambian stock market's total capitalization reached an equivalent of $5.5 billion at its last close. ZCCM Investment Holdings and CEC alone now account for a staggering 49% of this total valuation, underscoring their significant market presence. Since January, ZCCM Investment Holdings' stock price has increased by 132.7%, while CEC shares have advanced by 85.7% over the same period.

The high copper prices have had a ripple effect across the broader Zambian economy, boosting other major companies, such as Zambia Sugar ($609 million), Airtel ($578 million), and ZANACO ($377 million), the country's largest commercial bank.

Offshore investors have reaped even greater rewards. The Kwacha's 19% appreciation against the U.S. dollar means that investors who bought into the LuSE at the beginning of the year are now up 84% in dollar terms, trailing only Ghana for the best dollar return on the continent. The implied carry-plus-beta trade (long Kwacha, long copper equities) has delivered a Sharpe ratio of over 2.5, attracting South African and Mauritian funds that have traditionally overlooked Lusaka.

A Look at the Risks side

Despite the bullish outlook, risks remain on the horizon. The 2025 mining tax framework remains unchanged in the latest draft bill, creating some policy uncertainty. While CEC's $350 million 2025 capital expenditure plan is fully funded, any delays in the Kafue Gorge Lower transmission project could limit mine output.

A significant risk to the rally is a potential drop in copper prices. A move below $8,200 per ton would flatten consensus earnings-per-share growth to zero. However, even in such a scenario, the LuSE is still projected to rank in the top three African exchanges for 2025 earnings momentum.

Idriss Linge