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Makanaka Nyamutowera
THE year 2013 witnessed a worrying trend where several companies were delisted from the Zimbabwe Stock Exchange either through voluntary or forced delisting. There are now a total of 68 listed firms, down from a peak of about 83. Some of the companies that were delisted include Lifestyle Holdings, Steelnet, Gulliver, Apex, Trust, Interfresh and Cairns.

The trio of Redstar, TZI and Barbican completed the list and for these three, it was long overdue as they had not been operating for a long time.

Lifestyle Holdings opted to list on a foreign bourse whilst the others were either forced or volunteered to delist owing to operational challenges.

Although there remains a total of 68 listed firms, four companies — Celsys, Interfin, Chemco and Phoenix — remain suspended.
Phoenix applied for voluntary judicial management as its war with creditors escalated.

These four counters might as well be delisted if the issues that led to their suspension are not resolved timeously.
In the New Year, it seems the downward trend is likely to continue. So far we have witnessed the suspension from trading of PGIZ to allow for the conclusion of negotiations between the company and its lenders and creditors.

Companies like CFI, starafrica, Willdale and Zeco have continued to record losses since dollarisation. The turnaround strategies of these companies have not been very convincing. CFI recapitalisation plans have dragged on due to disagreements amongst shareholders and this has negatively affected the company.

As the environment gets ever tougher — more companies — both listed and unlisted, are likely to bite the dust.
As it stands, the ZSE is fast losing its attractiveness with only a handful of companies worth looking at for a serious investor. Who knows how many companies could be left listed by the end of year?

The reduction in number of listed companies indicates declining economic performance. If the economy improves or even if it is going to improve in the short-term, companies would opt to remain listed and new ones will be attracted to the local bourse.
So far it has been the opposite. If this trend persists we will hardly have stock exchange worth talking about.

Turnover trends are also worrying, indicating concentration into only a handful of counters, mostly the top five by market capitalisation.
The ZSE performed exceptionally well in 2013, posting a huge return of 32 percent, whilst turnover jumped by a massive 57 percent to US$485 million.

Foreign investors providing 61 percent of turnover accounted for the bulk of the trades.
The top five counters by market capitalisation made up 73 percent of all trades on the exchange, leaving the rest to share the balance.
Foreign investors are mostly interested in performing companies with a liquid share register. Most of the stocks on the exchange are just too small and illiquid to attract the attention of foreign investors. Also it defies logic that the top performing counter, GB Holdings, which jumped 700 percent only had trades worth just US$7 000 for the whole year.

The same trend has continued into the New Year. With activity having started on a low note, momentum is slowly picking up with turnover levels improving. Up to January 13, the Industrials Index had gained a slight 1 percent whilst the Minings Index was down 8 percent.

A total share value of US$16,2 million was traded with foreign investors still dominating in the heavily capitalised counters. Of the total, 87 percent or US$14,2 million of the funds represented trading in the top 5 counters.

These were Delta, Econet, Innscor, BAT and OK Zimbabwe. This left the rest of the counters sharing trading of just 13 percent, equivalent to US$2 million.

Some counters did not even trade at all. This trend is disturbing .The less companies that trade also puts the viability of stockbroking and asset management firms in jeopardy

There is no guarantee of the exchange’s survival. Even the companies that foreigners are targeting have indicated that the going is expected to get tougher.

For example, Delta indicated that volume growth will be subdued in the financial year to March 2014. Econet reported declining earnings in its interims to August 2013, whilst Innscor’s earnings to June 2013 were relatively flat.
This is all stemming from a combination of increased competition and reduced demand.

The economy is contracting both in absolute terms and by comparison with other countries.
Deterioration in the supply of utilities has had a negative impact on production costs.

Already, Press reports indicate that we could be heading for a deflation, which is not a healthy situation for any sector not exempting the stock exchange.

An economy like ours needs a stimulus to increase output, thereby boosting aggregate demand and further investment. A closer analysis of the turnover trends also show that little has been invested in the listed mining counters as the viability of the counters and the sector as a whole have been compromised due to the lack of capital.

Indigenisation laws and pressure to invest in refining metal where it is not felt to be economically viable have done more harm than good in as far as attracting capital to the mining sector is concerned.

Cumulatively, since dollarisation to the January 13, the mining index lost a whopping 58 percent.
Since the New Year to January 13, only US$4 200 or 0,03 percent of the total turnover of US$16,2 million was traded in the four listed mining companies.

A total of US$1 900 was traded in Bindura, Falgold US$900, RioZim US$1 400 whilst there were no trades in Hwange.
Something definitely needs to be done to bring life back to the local bourse.
An attractive stock exchange is crucial if we are to lure more foreign investors into the country.

This is because the stock exchange is the face of capital markets and a conduit through which liquid investments flows in both directions.
A performance that is broad based and evenly spread across all sectors of the bourse is ideal rather than having trades dominated by just a handful of counters.

As alluded to earlier, in the near term there might not be any attractive companies to talk about.
It is, therefore, essential that the authorities put in place measures to attract economic growth which will then filter through to companies so that those that are listed remain and new ones are attracted to the bourse.

Also companies should be attracted by the option of going public because of the benefits which include wider exposure and the ability to easily raise capital.

Unfortunately, the benefits of being listed now far outweigh the costs. Hence some companies are opting for voluntary delisting or suspension of trading whilst they sort out their issues in-house without too much scrutiny from the investing public.

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