Omega Ukama 
OLD Mutual Investment Group Zimbabwe (OM)’s Exchange Traded Fund (ETF) gained 93 percent during the first quarter of 2021, outpacing its benchmark — the Zimbabwe Stock Exchange (ZSE) Top Ten Index — which put on 57 percent during the same period.
An ETF is a security that tracks another asset, index, sector or commodity, but which can be purchased or sold on an exchange the same as a regular stock.
For a number of reasons, ETFs rarely ever track the underlying perfectly and the difference between the performance of the security and the yardstick is known as a tracking difference.
Early investors in the OM security will be very happy with its performance during the quarter as ETFs typically underperform their indexes by a small margin, with a positive tracking difference of 36 percent virtually unheard of.
Analysts, however, say indications are that the difference is narrowing. “There was a hype of demand as the OM ETF was introduced, pushing up price ahead of fundamentals and the market.
“It seems the ETF has started re-correcting to the market,” Mutandani Makuyana, Invictus Securities’ head of research told The Financial Gazette last week.
The ETF’s turnover on the ZSE in January was $31 million, but this declined to $16 million in February and $14 million in March.
The security, which was launched last December, started trading on January 4 at $1 per unit, and climbed to $1,93 by the end of March.
Meanwhile, the ETF is now the only fully dematerialised counter on the local bourse, according to Chengetedzai Depository Company (CDC).
Dematerialisation is conversion from physical certificates to electronic book-keeping.
CDC says 25 counters are now dematerialised and the average penetration ratio is now at 51,27 percent.
“All new listings are also being encouraged to insist on dematerialisation, like OM did with its ETF,” Campbell Musiwa, CDC’s chief executive told this publication.
The ETF was also recently added to the ZSE’s direct access service, which allows investors to participate without manual intervention by brokers.
ZSE Direct, which was launched last September, now accounts for more than 20 percent of all trades on the local bourse, according to chief executive Justin Bgoni.
Finance minister Mthuli Ncube says the introduction of the ETF was a good launchpad for derivatives and other alternative investment instruments in the country’s shallow capital market.
“This is a good starting point for derivatives and other structured products in Zimbabwe… It is my hope therefore, that OMIG will also lead the way and launch the first Real Estate Investment
Trust (REIT)… again, it would be wonderful to see a gold ETF listed within our shores,” the minister said at the launch of the ETF in Harare.
In addition to gazetting legislation for the ETF roll-out last year, the government also introduced legislation to allow the introduction of REITs — special purpose entities owning and typically operating real estate through which investors can gain indirect exposure to property.
newsdesk@fingaz.co.zw
