The negative sentiment on the country’s economy is beginning to repel foreign investors who contribute more than 50% of turnover on the Zimbabwe Stock Exchange (ZSE), bourse, a stockbroking official has said.
BY TATIRA ZWINOIRA
Last year, turnover on ZSE was $228,6 million — the lowest since the use of the multi-currency regime in 2009.
Stockbrokers Association of Zimbabwe chairperson Benson Gasura said the performance of the country’s economy was a critical factor in earnings forecast of the listed companies, thus there has been a decline in foreign turnover.
“The annual turnover figure for 2015 of $228,6 million was the lowest since dollarisation in 2009. This implies low profit margins for the broking firms which have since started rationalising operations after the automation of trading and settlement on the ZSE in 2015,” he said.
“The pressure on the profit margins also has an adverse effect on the research coverage of listed companies on the ZSE due to lack of resource as broking firms seek optimal headcount.”
Gasura said in the current economy the viability of the stockbroking business “is put to the test though an opportunity is presenting itself in advisory for the listed companies”.
“In the trying times stockbrokers can assist companies restructure their debts or identify foreign partners to navigate the tough macro-economic environment. The capital markets will play a vital role in bringing the Zimbabwean economy back to its feet again,” he said.
“The capital markets will inevitably play a critical role as an alternative capital raising platform for the productive sectors of the economy and the introduction and trading of debt instruments in the market will keep stockbrokers busy in the meantime brokers have to take advantage of automation, manage costs and operate under a very lean structure.”
A number of companies have delisted from ZSE affecting investor confidence on ZSE. Gasura said the delisting of a quality stock would reduce stockbrokers’ commissions with the impact felt across the board as a quality stock increases liquidity levels by attracting investors. He said the delisting of an illiquid company would not rattle the market the same way a liquid stock exits the bourse. Gasura said an increase in the number of companies delisting also negatively affects investor confidence on the equities market thereby reducing the turnover figures.
Gasura said the retail clients have been mainly disposing to exit the market while the institutional clients, where much of the business comes from, have reduced their levels of exposure to the equities market.
In the outlook, Gasura said: “…we strongly believe the stock market has presented a once in a life time opportunity for long-term investors to take advantage of the current low prices and the dominance of foreign players in the market is a reflection of that, as the economy recovers, and as we expect it better days are certainly ahead of us in the capital markets.”