Foreign investors dump ZSE stocks

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FOREIGN investors’ activity on the Zimbabwe Stock Exchange (ZSE) remained heavily skewed towards selling in 2023, with a net disposal of $39 billion.

Analysts attribute this trend to unfavourable policies that have spooked foreign investors and prompted them to utilise the reserve bank’s currency auction system to move their money out of the country.

Despite purchasing shares worth $16,4 billion throughout the year, foreigners sold off holdings totalling $55,3 billion. This lack of confidence was echoed by Imara Asset Management Zimbabwe’s chief investment officer, Shelton Sibanda, at a recent business conference: “Without reforms, particularly respect for rule of law, property rights, foreign exchange deregulation, and anti-corruption enforcement, foreigners will continue to avoid the local bourse.”

He further remarked, “Rebuilding trust will be a slow process, and we shouldn’t expect substantial foreign investment in the near future.”

Foreign activity accounted for 6,5 percent of the ZSE’s $557 billion turnover in 2023. This came amid a slump that has been attributed to regulatory measures implemented in 2022 to curb speculation. The All Share Index closed the year with year-to-date gains of about 800 percent, a significant drop compared to the 4 500 percent surge witnessed in 2021.

This marks the bourse’s longest “slump” since 2016, when bond notes were introduced. While the market has continued to trend upwards, the gains of the past two years pale in comparison to the pre2022 boom.

The 2022 regulations, which included restrictions on inter-account transfers and increased capital gains tax, are seen as major contributors to this slowdown. The number of listings has also slumped, with only a single REIT in 2023 compared to four ETFs and a REIT in 2022. Plain vanilla equity listings have virtually dried up, with several companies citing fundraising difficulties.

Meanwhile, a handful of companies have migrated to the US dollar-denominated Victoria Falls Stock Exchange, established in 2020. Amidst the slowdown, Zimbabwe’s key investment group, the insurance and pensions industry, has reduced its exposure to listed equities.

At the end of June, these assets constituted only 26 percent of their total holdings, down from 40 percent a year earlier. This shift reflects a preference for investment property, which now comprises 52 percent of the sector’s assets, up from 38 percent.
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