Investors pull out of a cash strapped Zim
FOREIGN equity holders are disposing of their investments on the Zimbabwe Stock Exchange – selling off $61 million (R823m) so far this year in shares compared to foreign purchases of $33.5m.
Listed companies have been unable to pay dividends to foreign shareholders over the past two years as a result of a cash crunch, but central bank governor John Mangudya last week announced that the government would set up a portfolio fund to enable payments.
MMC Capital analysts said in a note that “the difficulty in remitting sale proceeds, driven by Nostro pressures, resulted in some foreign investors opting to sell and reserve better positions” in the remitting queue.
“The trend is worrying, given that attracting foreign capital inflows has an overall positive impact on economic growth,” MMC said. “The surge in equities has largely been driven by local institutional investors seeking a real growth component that is provided by equities.” Fund managers such as Old Mutual say foreign investors have changed strategy from monetary assets as they seek shelter from the prolonged liquidity crisis.
Traders said that foreign shareholders were still keen to invest in counters such as Hippo Valley, Delta Corporation, Econet Wireless and seed producer Seedco, among others.
BAT Zimbabwe and Delta Corporation, the local unit of AB InBev are also among the companies that have been unable to pay dividends to foreign shareholders on time. Econet Wireless also had to carry out an offshore rights issue to settle maturing international debts as Zimbabwean companies fail to pay creditors and default on loans. “Foreign investors will obviously sell off at the latest sign of trouble in getting their funds from Zimbabwe, but right now it has been tricky to get money out of Zimbabwe,” said one trader. MMC Capital said “given the minimal investment asset classes on the local market, equities remained the better asset class, given unattractive returns in the other asset classes” in Zimbabwe at the moment. But the central bank said last week that a new portfolio fund will change the situation for the better.