Crunch time ahead for ZSE
THE turmoil afflicting the country’s volatile equities markets could drag on during the current year, with the Zimbabwe Stock Exchange (ZSE) likely to experience a bloodbath far worse than that of the previous year.
The ZSE traded through its worst period in five years during 2015.
It shed US$1,5 billion in value as turmoil engulfed the markets, amid weak investor sentiment triggered by declining earnings and conflicting signals over key policies such as indigenisation and economic empowerment.
MMC Capital, a local stockbroking firm, is expecting economic headwinds to continue mounting in 2016, hence impacting negatively on the upside potential of the market.
“Economic theory stipulates that there is a strong positive correlation between stock market performance and economic growth and since there is no economic stimuli in sight, activity on the ZSE will continue to be depressed. On the back of the persistence of liquidity challenges locally, trades on the local bourse will mainly be propelled by foreigners and trading will be concentrated in blue chip counters which are dear to them,” said MMC in the Zimbabwe Equities Market review released on February 9.
The Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU) has also highlighted in its recent report that the continued stock market plunge could send wrong signals to foreign buyers and force them to withhold vital inflows.
“In 2016, activities on the ZSE are expected to continue on a downward trend coupled with low investor confidence and declining economic fortunes,” said ZEPARU.
“Market capitalisation, which stood at US$4,33 billion at the end of 2014, declined by 28,97 percent in 2015 underpinned by poor performance on the stock market. Lower stock market capitalisation implies a risky market for investment … this will likely affect decisions to buy by foreign investors,” ZEPARU said.
As if to confirm the fears, two counters have exited the ZSE since the beginning of the year, giving both investors and authorities a glimpse of the havoc that is likely to shake the bourse and push stocks further south.
Celsys Limited left the ZSE last week after applying for voluntary suspension in August 2012 as it worked towards a take-over by Cambria Africa Limited, which would reverse list.
An ambitious Pan African high-end-of the market printing firm that had exhibited immense potential for growth after an earlier takeover by the London listed LonZim about eight years ago, Celsys was de-listed on February 9, 2016.
“The ZSE hereby advises that Celsys Limited…will be removed from the ZSE official list with effect from 9 February 2016,” said ZSE chief executive officer, Alban Chirume.
He said listing rules compelled Celsys to continue complying with ZSE requirements during the suspension period but there had been breaches that included non-publication of financial statements for 2014 and 2015.
A week before, Radar Holdings Limited had pleaded with shareholders to approve a proposal to exit the ZSE.
The proposal goes to a shareholder vote at an extraordinary general meeting on February 25.
“The reason for the proposed delisting is that the group continues to underperform. After tax profits declined from US$288 006 in FY14 to a loss of US$288 071 in FY15. Further compounding the group’s underperformance are costs associated with remaining listed on the ZSE that are exuberant,” Radar said.
A significant number of counters have delisted from the ZSE after failing to meet the listing requirements, an indication that the volatile climate that has dogged the bourse since dollarisation in February 2009 is deepening.
Industrial counters, Apex Corporation, Cairns Holdings, Chemco Holdings, Interfresh, Gulliver, Interfin, Lifestyle Holdings, Phoenix Consolidated, Steelnet and financial services firm, Trust Holdings delisted in 2013.
In 2014, PG Industries was suspended while Interfresh also delisted in December 2013.
Cottco was also recently suspended after seeking provisional liquidation due to debt problems.
Companies reporting for the year to December 31, 2015 have released depressed earnings.