Zimbabwe's Domestic bourse suffers continued decline
WHAT a year it was for the domestic bourse, but one which brought little cheer and more misery for investors.
The Zimbabwe Stock Exchange (ZSE) maintained a downward trajectory throughout the year, and without doubt this reflected the economic environment in the country, which is significantly depressed and characterised by a liquidity crunch.
ZSE market capitalisation shaved off nearly US$2 billion as at November 30, 2015 to settle at US$3,3 billion year-on-year, weighed down mainly by the poor performance of most counters.
Rob Webster, managing director of the ZSE-listed cables manufacturer, CAFCA, said the decline in the bourse’s value was a reflection of investor sentiment in the economy.
“As the economy declines so will the share prices. Foreign investor activity will also reduce due to the perceived country risk. Until the political direction changes both prices and volumes on the ZSE will continue to drop,” he said.
During the year at least US$327 million was raised on the ZSE through various capital raising options. The Seedco-Limagrain transaction was the biggest of all transactions that took place on the stock market.
The local bourse witnessed two new listings during the course of the year. Listed construction and manufacturing company, Masimba Holdings, unbundled and separately listed its plastics manufacturing subsidiary, Proplastics, in June though a dividend-in-specie.
The listing was the second on the ZSE in five years after that of Padenga Holdings which also listed through a dividend-in-specie following its unbundling from Innscor Africa in 2010.
The listing of Proplastics was the first since Chirume was appointed ZSE chief executive officer in 2013.
In November Simbisa Brands listed on the local bourse, marking the first listing since adoption of an automated trading system during the year. Simbisa listed on an opening price of 12c and closing price of 14,32c. Again, this listing was through an unbundling process at Innscor Africa, which has been pushing aggressively to unlock shareholder value in its business. The unbundling and consequent listing of units has been part of this strategy.
Oxlink Capital chief executive officer, Brains Muchemwa, said the recovery of the economy would be the only sustainable stimulus to the ZSE. This, he said, would improve aggregate demand anchored on industrial productivity and a policy shift.
“Zimbabwe needs to focus on attracting investment and improving the business environment. It needs to restore business and investor confidence,” he said.
Astra Holdings delisted from the ZSE this year because its shareholding structure was no longer in line with ZSE listing rules, which stipulate that at least 30 percent of a company’s issued shares should be held by the public.
Last Monday, GetBucks Zimbabwe opened an Initial Public Offer to raise a total amount of US$3,2 million through the subscription of 93 567 251 ordinary shares in the company at a subscription price of 3,42 cents per share. This will pave way for its listing on the ZSE.
Appetite by foreigners on the local bourse has also been shrinking. Foreigners bought shares worth US$70 million in the six months to end-June compared with US$133 million during the same period last year, accounting for 52,5 percent of trading on the exchange versus 70 percent a year ago.
The figures are expected to end the year much lower than last year.
MMC Capital said the ZSE remained less attractive for any company seeking to raise capital through listing.
“The underperformance (of the stock market) could reflect fatigue on the average risk averse investor as the economy continues to underperform,” MMC Capital said.
Investors have become wary of investing on the stock market while asset managers and pension funds are opting for fixed return instruments. There are also concerns that it is expensive to trade on the ZSE compared to other regional markets. However, big market downturns like the one the ZSE is experiencing also create big opportunities for the risk taking investor.
Chengetedzai Depository Company last month said the on-boarding of Simbisa Brands (Simbisa) on the Central Securities Depository (CSD) platform brought the total number of on-boarded companies to 62 while Border Timbers remained the only counter yet to come on-board as it is still under judicial management.
The situation has apparently affected securities trading firms. For example, the October trading pattern reveals that total brokerage fees that accrued to brokers in that month were under US$300 000 before taking out rebates. After rebates, the average for brokers was paltry; this was more pronounced for the smaller brokerages considering that 80 percent of the market share of stockbroking services is held by less than five firms.
Foreign inflows were at the lowest (year to date) in October at US$6,39 million and the lowest since June 2010’s US$4,8 million while there were more outflows at US$7,49 million.
Investors will continue to be concerned about the country’s indigenisation and empowerment policy compelling foreign investors to cede at least 51 percent stakes to locals. Government has attempted to tone down its rhetoric on the empowerment law this year to attract investors but this has yielded little activity.
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