Foreigners scramble for ZSE shares

04 Jan, 2014 - 00:01 0 Views

The Herald

Happiness Zengeni Business Editor
FOREIGN inflows on the Zimbabwe Stock Exchange rose by close to 40 percent last year, with more of them coming in the second half of 2013 after the watershed July 31 harmonised elections.This puts to shame claims from some political and media sections that Zanu-PF’s crushing victory in the polls, premised on indigenisation and economic empowerment policies, was scaring away foreign investors.

The main driver of foreign investment on the bourse has been the policy master-stroke of introducing US$ trading by the then Acting — and now substantive — Finance Minister Patrick Chinamasa in early 2009.

In fact, the month of August 2013 saw the ZSE recording its second-highest inflow from foreign investors at US$33,31 million compared to US$17,79 million recorded in July, the last month of the inclusive Government formed by the country’s main political parties in 2009.

Foreign investors bought US$291,01 million worth of shares against US$211,57 million in 2012. The value of turnover sold by foreigners increased to US$194,73 million from US$152,75 million the previous year.

The market went through its strongest bull run since dollarisation with data from the ZSE showing that a total of US$485,8 million worth of shares were traded in 2013; an 8,4 percent increase on 2012’s US$448,2 million.

This was also more than the US$477,5 million traded in 2011 and US$391 million in 2010.  Trades dropped to 19 002 from 21 426 as the average trade rose to US$25 565 from US$20 920.

Volumes traded in 2013 amounted to 2,99 billion shares compared to 3,51 billion a year earlier. Foreign investor participation contributed close to 65 percent of the total trades.

Since 2009, foreign investor participation on the ZSE has averaged 40 percent while the balance was accounted for by local investors, mainly institutional investors like pension funds.

There was more value traded in the second half at US$263,17 million compared to US$222,5 million in the first half of the year in spite of the sell-off triggered by uncertainty following election results.

According to analysts, the main attraction of the ZSE to foreign investors has principally been the fact that trading is conducted in US dollars, therefore there is limited or no exchange rate risk for fund managers in advanced economies.

Most emerging and developing economy currencies are very volatile therefore foreign fund managers’ risk losing value exchange losses.
Financial reporting by companies listed on the ZSE is done in US dollars, which makes it easier for foreign investors to analyse and understand them.

Further to that, there are arguments put in favour of the US quantitative easing and its positive effects on ZSE performance.
It is estimated that nearly half of the increase in the US monetary base under QE leaked out in the form of increased gross capital outflows.

The destinations of the leaked funds are primarily the emerging and developing economies, where they arrive mainly in the form of portfolio investments as witnessed on the ZSE.

There were no changes to the top 10 in terms of market capitalisation although TSL is now US$4 million short of making this elite club.
From 10th position, Old Mutual leapt over ABC and National Foods, which has tumbled from seventh to the bottom of the Top 10. SeedCo has overtaken Hippo Valley to be ranked as the largest agro-industrial concern.

BAT Zimbabwe overtook OK Zimbabwe to become the fourth-biggest company by market cap, its highest position since dollarisation.
In the 11-20 zone, Barclays has overtaken FBC again, and lies just behind CBZ in position 13. Padenga and PPC are the new entries in the top 20 at the expense of FML and Colcom.

Edgars in position 21 looks placed to re-enter the top 20 for the first time in nearly a year. Those to add shares since the last update in November include Afdis (700 000), Bindura (19 million), Delta (55 000), Edgars (250 000), NMB (100,1 million) and OK (558 800).

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