Paul Nyakazeya, Group Digital Editor 
THE desperation of investors seeking liquidity to pay down high interest rate borrowings is undervaluing stocks on the Zimbabwe Stock Exchange (ZSE), a financial services firm has said.
First Mutual Wealth (FMW), said despite this, the market remains an inflation hedge and offers decent value retention and growth prospects amid high inflation.
“It is an opportune time for picking up equities at discounted values. It is anticipated that risks that will threaten real growth in the outlook are more tilted towards economic performance and policy inconsistency which may result in further performance shocks in the outlook,” said FMW in its second quarter economic and market review note.
The asset management firm said the value of trades was however 72,5 percent higher compared to the previous quarter as a significant bull run in the month of April and significant selling pressure trades in June underpinned trade volumes during the second quarter.
Policy pronouncements in May 2022 and the latter part of June 2022 however thinned bids on the main bourse as investors were seeking liquidity to hedge against high interest rates and other uncertainties.
“The technology sector continues to dominate the ZSE market capitalisation despite a relatively lacklustre share price return performance from
Econet Wireless Zimbabwe and Ecocash Holdings during the quarter of 16,4 percent and -2,1 percent respectively,” the firm said.
FMW believes that the relatively low returns registered by the ZSE in the second quarter of 2022 reflects an immediate response to policy pronouncements made during the quarter that have driven investment outflows from the market but remain transitory.
“The current raft of policy announcements is expected to limit ZSE liquidity in the immediate term and increase the cost of borrowing for listed corporates in the outlook hence the need to be prudent in stock selection as ZWL liquidity is expected to be tighter going forward,” said FMW.
The Victoria Falls Stock Exchange (VFEX) closed the quarter with four securities ― Bindura Nickel Corporation, Caledonia Mining Corporation, Seed-Co International and Padenga Holdings.
“Padenga Holdings is the only company on the VFEX that seems to be trading on a more regular basis followed by BNC whilst Seed-co International and Caledonia remain tightly held despite receiving regular consistent bids.
“We maintain that the limited number of securities listed on the exchange; limited retail and local pension fund participation; and free funds restrictions mean the exchange will continue to have limited trades notwithstanding the relatively good quality listings. For trades to improve, explicit policy changes need to be expressed on whether or not the exchange will only trade “free funds” in the outlook,” the firm said.
Commenting on the Exchange Traded Funds Market (ETFs), FMW said the instruments seem to be trading at relative premiums to their Net Asset Values on the ZSE as they have attracted considerable retail market investor interest.
During the quarter, the ETF market capitalisation grew 157 percent and year-to-date was up 1 290 percent largely assisted by the addition of the Datvest Modified Consumer Staples which listed on March 03, 2022, as well as the Morgan Made in Zimbabwe ETF which listed on 16 June 2022. Their current market capitalisation as at 30 June 2022 amounted to $8,9 billion.
