Several stockbroking firms are struggling as a result of an illiquid market with less coming from foreign investors and very little from local institutional investors, the Securities Commission of Zimbabwe (SEC) has said.
The country has 19 stockbrokers, but since the beginning of the year the largest turnover recorded by on the Zimbabwe Stock Exchange (ZSE) was $21 million while the lowest was $348 000.
Of the 19 stockbrokers only five are contributing meaningfully to market turnover.
Most of the brokers are struggling because of the small market and economic conditions, SEC chairperson Willia Bonyongwe said.
Basically that is why we are saying, we need to grow the market. We have the potential as an economy.
Bonyongwe said the ZSE should be transparent and automate to increase trading hours for stockbrokers. She said automation will likely increase turnover by fourfold like other countries in the region.
Bonyongwe said most foreign investors were interested in transparency and automation compared to the manual system that people think could be manipulated.
A local analyst expressed concern at the persistence of liquidity challenge and low value of daily trades.
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The highest deals so far (Meikles and Delta) have been done by one stock broking firm Lynton-Edwards Stockbrokers while last year the same stockbroker accounted for 20% of the special bargains.
Brokers receive a fixed brokerage fee of 1% on every transaction they make. The money they make is determined with the deals they make a day on approximately two hours of trade that they have.
On Tuesday this week the total turnover for the stock market stood at $478 353 while the market capitalisation was at $3,5 billion. The African Development Bank (AfDB) said in 2011 the turnover volume on ZSE declined to 5 billion shares from 6 billion in 2010.
Despite this decline, the value of the turnover increased by $118 million a sign of an increase in the average value of the shares traded. This indicates the huge potential that resides in the stock market to be an avenue for investment, the AfDB said.
