ZSE rally con­tin­ues de­spite net out­flows

The Sunday Mail (Zimbabwe) - - BUSINESS NEWS - Enacy Ma­pakame Busi­ness Reporter

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.

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