Kingdom Financial Holdings Limited (KFHL) has questioned the economic benefits of the planned setting up of a second tier bourse by 2013 to cater for small-to-medium enterprises (SMEs) arguing the main Zimbabwe Stock Exchange (ZSE) is already facing liquidity challenges.
In a statement at the weekend KFHL said it was prudent to develop the existing ZSE to international competitiveness.
“With the challenges of shallowness, lack of investor education at the individual level, low turnover, paucity of tradeable securities and poor capitalisation of Zimbabwean SMEs, it is difficult to see how a multiplicity of exchanges can benefit the country,” KFHL said.
It said the trend in Europe has been geared towards consolidation of existing exchanges as opposed to proliferation.
The country plans to set up a second bourse by 2013, mainly for SMEs, despite the malfunctioning of the Commodities Exchange launched early this year meant to facilitate the trade of agricultural commodities.
KFHL said $392 million was last year spent on five counters — Delta, Econet, Innscor, SeedCo and OK — leaving a balance of 42,8% shared among 71 counters.
“A closer look at the top five counters by turnover in 2010 also indicates that they make up 50 % of the total market capitalisation, pointing to the fact that small companies are relatively illiquid and not favoured by investors,” said KFHL.
“If the current crop of investors is shying away from small capitalised stocks what will give them impetus to delve into microcapitalised stocks?”
At present close to 90% investors are institutional and the remaining 10% individual.
The financial institution said reduced listing requirements for the planned bourse would be seen as another stumbling block by stakeholders.
“Given that ZSE listing requirements are not very rigorous yet many companies (are) not listing on the ZSE, would they list on the SMEs bourse?” asked KFHL.
Meanwhile the ZSE this week opened on a low note weighed down by President Robert Mugabe’s sentiments last week that the country will hold elections this year.
On Monday the industrial index traded in the negative shedding 0,23% to 165,47 points while the mining index slipped 0,54% to 161,31 points.
Volumes traded were down to 5,5 million from 40 active counters from 24,7 million shares traded on Friday last week.