UNDERCAPITALISED publicly-owned companies are expected to embark on a flurry of capital-raising initiatives after the forthcoming polls amid indications that market capitalisation of the Zimbabwe Stock Exchange (ZSE) will breach the $5 billion mark by year end, a local securities dealer has projected.
Report by Bernard Mpofu
In its latest report titled 2013 Zimbabwe Equity Strategy Outlook . . . A Watershed Year for Zimbabwe, a research unit of local brokerage firm Invictus Securities, said more companies would seek capital after the polls as they position for growth after an anticipated stable economic and political environment.
Zimbabwe will on March 16 hold a referendum on the new constitution which is expected to be followed by general elections.
The polls will mark an end to the shaky coalition government formed in 2009 after a controversial presidential runoff in 2008.
The forthcoming elections, the report said presented a good opportunity to demonstrate that the country was maturing as a democracy and rapidly becoming a more attractive investment destination for investors.
Mid-tier stocks, according to the report were expected to attract more foreign investors in the run-up to the elections. “Corporate activity is likely to increase in 2013, especially in the banking sector as banks seek desperately to comply with new capital requirements.
“Furthermore, we expect a number of listed companies to raise expansion capital as the economy recovers,” the report in part, added.
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“We expect, the ZSE to perform strongly over the next three years supported by a more stable political environment and strong macroeconomic growth.
“We expect this trend to continue in 2013 as sentiment towards Zimbabwe improves and foreign investors seek to take positions ahead of the forthcoming elections.
“All capital raising initiatives planned from 2011 were thwarted as implementation of the indigenisation and empowerment provisions gained momentum.
“The mining sector was the biggest loser given the funds that were lined for miners such as Bindura and RioZim.
“We, however, expect to see a significant increase in the number of companies seeking to raise capital after the elections.”
Critics, however, contend that lack of clarity on indigenisation regulations compelling foreign-owned firms to sell 51% stake to locals has disrupted plans to raise capital.
Notwithstanding this uncertainty, foreign participation improved steadily from 35,4% in 2009 to over 47,2% in 2012.
“We encourage investors to take positions ahead of elections and strongly believe that Zimbabwe is poised for a strong recovery in 2014. We believe that the forthcoming elections will be the catalyst for sustainable growth and development in Zimbabwe.
“Regardless of the outcome of elections, we firmly believe that the new government will adopt a more investor friendly approach in order to raise much needed capital for expansion and job creation,” Invictus Securities said.
“We expect ‘a flight to safety’ as investors rotate into blue chip stocks ahead of elections. However, we believe that post-election investors will look for value among the mid-tier stocks. We expect the market to reach $5,1 billion market cap in 2013, implying upside of 30%.”
The ZSE market cap closed the month of February at $4,7 billion.
