Spooked investors flee ZSE

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FOREIGN investors continue to flee the Zimbabwe Stock Exchange (ZSE) by transferring their stocks to South Africa through dual-listed counters.

Information gathered by this publication shows that 4 973 478 shares in Old Mutual , worth almost US$8 million, have been transferred from the ZSE to the Johannesburg Stock Exchange since the announcement of the monetary policy in February.
Batanai Matsika, the head of research at Morgan & Co, said the transfer of fungible stock from the ZSE will continue for the foreseeable future until Zimbabwe’s foreign currency shortages improve.
“When the interbank was announced through the monetary policy statement this trend slowed down because investors waited to see if the interbank market would provide a way for them to liquidate and move their funds.
“However, the interbank market has not provided much liquidity as there has only been about $65 million traded since it was introduced. Still, even the little forex that is there is mostly going to the manufacturers and other such priority needs making it virtually impossible for portfolio investors to get any currency,” he said, adding that signs show that the transfers have now commenced.
“The portfolio investors sell blue chips and they buy shares in Old Mutual and then they transfer to the JSE,” he said.
Matsika said the transfers were also a result of portfolio investors’ activities to capitalise on arbitrage profit from buying and selling fungible stock across the exchanges.
“Activity in Old Mutual had actually come off but it has since picked up,” he added.
IH Securities (IH) recently said it expected foreign investors to continue to flee the ZSE due to lack of clarity around the central bank’s purported ring-fencing of foreign liabilities such as dividends and portfolio investments.
“With the silence on interest rates and the ring fencing of foreign liabilities such as dividends and portfolio investments, we expect to see normal activity on the local bourse whilst foreign participants continue to exit the market through fungible stocks such as Old Mutual and PPC in the short term,” the equities firm said in a 2019 monetary policy review note.
This comes as the central bank’s ‘portfolio fund, which it introduced in 2017 in an attempt to speed up the repatriation of portfolio-related funds to foreign investors invested on the ZSE, seems to have failed to gain traction due to shortages of foreign currency in the country.
Lately, foreign based companies with subsidiaries in Zimbabwe are struggling to extract profits and dividends from their business operation in the southern African country.
Hippo Valley Estates’ South African parent company, Tongaat Hulett is in a precarious position as it faces a negative cash flow in the current trading period partly due to its inability to recieve dividends from its Zimbabwean and Mozambique operations.
Meanwhile, Delta Corporation’s major shareholder Anheuser-Busch InBev has had to settle for RTGS$120 million worth of RBZ savings bond as recompense for its dividends that are stuck in Zimbabwe.
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