Zim Stock Exchange Sinks Despite Foreign Interest

First-quarter trade dealings on the Zimbabwe Stock Exchange (ZSE) were dominated by foreign investors who helped breathe liquidity into the subdued equities market, although it still retreated in value by as much as 10% compared to the same period last year.

Zimbabwe shed nearly 4 000 formal jobs and about 150 companies last year as it struggled to emerge from deflation and other economic woes. Fund managers, the International Monetary Fund and other experts say the government should fix the operating and legislative framework and open up more readily to foreign investments to spur growth.

“The foreign component is the dominant activity driver for the market driving both liquidity and supply. The total spend by foreign investors in the first quarter totalled US$41.8m, in the process providing 60% of the liquidity in the review period.

“Similarly disinvestments were dominated by foreign investors that accounted for an estimated $39.2m in value which was 56% of the total turnover for the quarter,” brokerage firm EFE Securities said in a quarterly review report.

Kudzanai Sharara, research analyst at Lynton Edwards Securities, said in another report that as many as 30 counters closed in the red with only 16 in the black during the period under review. About 18 counters traded unchanged, pushing down turnover for the period by 10% to $69.7m.
“This is the lowest ZSE turnover since 2009 (first year of trading in US$) when turnover for the first three trading months amounted to $17.1m,” Sharara said.

However, Tinotenda Kambasha, executive director at Harare-based Imara Edwards Securities, said on Tuesday that some investors were still keen on Zimbabwe despite the sluggish economy. He said investors seeking exposure in the region always adopted a long-term view of Zimbabwe as a destination.
“Foreign investors and portfolio managers with an interest in the region tend to be long-term strategists and value investors. They are looking five or 10 years down the line… they are well acquainted with current difficulties and market risks, but they also see value opportunities,” said Kambasha.
Market activity was dominated by heavy cap stocks such as SABMiller unit Delta Corporation, Econet Wireless and fast food and retail counter Innscor Africa. These counters “are deemed to have sustainable models in the face of weak economic fundamentals”.
Lynton Edwards Securities said the period was “characterised by investor apathy”, with the main industrials recording a loss of 2.81% to 158.22 points as at March 31 2015 and mining coming off worse, after dropping 38.74% to close the period at 43.93 points.
“We adopt a sceptical view towards the equities market as the country has not done much with regard to economic, institutional and political reform since the last elections. We thus expect the ZSE to close approximately 10% in the negative position at year end,” the brokerage company said