THE market capitalisation of the Victoria Falls Stock Exchange (VFEX) has increased by 75% year-to-date to US$992,88 million as issuers pursue broader financial sources, tax benefits and brand positioning, according to a leading advisory firm.
In its first quarter report for 2023, FBC Securities said the foreign currency-denominated bourse continued to gain momentum, attracting big counters.
To date, 10 counters are trading their shares on the waterfall bourse.
These include African Sun, Axia Corporation, Bindura Nickel Corporation, Caledonia Mining Corporation, Innscor Africa, National Foods Holdings, Nedbank Group Limited Zimbabwe Depository Receipts, Padenga Holdings, Seed Co International and Simbisa Brands.
“Market capitalisation has grown 75% year-to-date to US$992,88 million. Moving into next quarter, we expect to see more migrations to the VFEX as the theme of dollarisation continues locally,” the research firm said.
The waterfall bourse also has a steady pipeline of new listings. First Capital Bank has joined the list of companies slated for VFEX migration.
West Properties is set to become VFEX’s first initial public offering, as all listings on the bourse to date have been migrations from the Zimbabwe Stock Exchange (ZSE).
FBC Securities said liquidity challenges remained a major drawback, limiting pronounced investor participation at the VFEX.
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“As the number of quality listings on VFEX continues to grow, and the flow of US$ liquidity increases in the formal economy, we anticipate improved activity on VFEX in the medium to long term,” it said.
The researchers said global and the local economic outlook remains largely uncertain as a result of high interest rates and inflation dynamics as well as uncertainty around the upcoming elections in Zimbabwe.
“Due to the prevailing uncertainty, it would be prudent for investors to take positions in defensive stocks, with resilient business models and stable dividend policies to hedge against value loss.
ZSE has seen an increase in delistings by top counters in favour of the rapidly expanding US dollar-denominated VFEX as the bourse continues to attract big companies.
“Migration of quality stocks from ZSE to VFEX, as opposed to new listings, may however be detrimental to the viability of the local currency-denominated bourse,” it said.
The research firm said the prevailing uncertainty in the economy drove the case for investment in defensive stocks with a proven record of performance, even in times of downturn.
It said investors would derive value from holding positions in counters with diverse business models, inflation hedging capabilities, foreign currency generation capacity and stable dividend policies.
“A general bullish sentiment is likely to prevail on ZSE; however, gains may be moderated by inflation tightening measures and liquidity constraints. VFEX remains a viable option for investors with US$ liquidity, offering returns and value preservation in a more stable currency than the Zimbabwe dollar.”
ZSE registered improved performance over the first quarter. Year-to-date, ZSE rose 98% to 38 568,48 points at the end of March.
The Top 10 Index rose 87% year-to-date, to close March at 12 311,13 points. Market capitalisation grew 65% over the quarter from $2,04 trillion to $3,34 trillion.