ZSE rally continues despite net outflows
THE rally on the Zimbabwe Stock Exchange (ZSE) continued in the five months through May despite net outflows driven by foreign investors.
The price uptick returned to the market late April with renewed buying interest from local funds seeking better returns compared to money market investments.
By close of trade Thursday, the bourse’s mainstream industrial index rallied to 191,07 points on strong interest in top cap counters.
But foreign investors sold more shares than they bought. In the five months to May, outflows at US$47 million were more than inflows (US$21 million).
Outflows peaked in March, with foreigners offloading stocks worth US$19 million compared to buys at US$12 million. Overall, foreign sales in 2016, which amounted to US$140 million, were US$80 million more than buys.
In 2015 net outflows are only US$4 million. Market watchers say foreign investor sentiment has been weak across regional exchanges on both lower commodity prices and exchange rates.
Securities Exchange Commission of Zimbabwe (SECZ) chief executive officer Mr Tafadzwa Chinamo said local trading costs on the ZSE were relatively more than on regional exchanges.
“At macroeconomic level, the general macroeconomic stability is key in attracting investment,” said Mr Chinamo.
“At regulatory level, there is need to work on reducing the cost of doing business on our market. Just by considering the cost of doing business, the ZSE remains more expensive than regional peers simply by comparing total trading costs.”
SECZ believes that while capital markets have not been spared from the current economic headwinds, there is need to assure foreign investors of clear and smooth repatriation of market proceeds.
The Reserve Bank of Zimbabwe (RBZ) increased the single investor limit on the stock exchange to 15 percent from 10 percent on February 4, 2016 as part of broad measures to boost foreign investment.
The threshold for aggregate foreign investment was similarly upped to 49 percent from 40 percent.
Stocks such as Old Mutual rose as a result. But despite the RBZ’s interventions, foreign deal flow as a proportion of total value traded fell from 56 percent to 52 percent in 2016. However, since beginning of June, foreign investors have been trickling back to the market. “There is need to win back lost trust for the restoration of investor confidence,” added Mr Chinamo.