The Zimbabwe Stock Exchange (ZSE) is fast losing its allure despite being one of the top performers in the region in recent years as the deteriorating economic environment in the country coupled with political interference is increasingly triggering investor apathy, 263Chat Business has established.
Several investors have exited the bourse in recent years as sentiment in the market have diminished.
ZSE was recently suspended from trading last month by a government order, a move most analysts described as a complete disregard of property rights and likely to worsen the already tainted image of the country.
In its 2019 Annual Report released last week Friday, the ZSE said it failed to attract new listings but lost three counters during the period under review namely, PG Industries (8 April 2019), Willdale Preference Shares (8 April 2019) and Getbucks (31 October 2020).
This has been a familiar trend since around 2015 where the number of companies de-listing from the bourse has far outweighed new listings.
Reasons for this, has been a harsh economic operating environment for businesses that has restricted companies growing from private to public markets and also the bourse has not been yielding better valuation of listed companies.
There is general market consensus that counters on the bourse have been undervalued ever since the country started to de-dollarize.
ZSE capitalization has been narrowing as a result. On last day of trading the ZSE capitalization stood at ZWL$ 228.58 billion which translates to US$2.54 billion using the parallel market rate against highs of US 4.37 billion in 2015.
“Foreign Direct Investment (FDI) Inflows in Zimbabwe plummeted from US$717 million in 2018 to US$259 million in 2019, highlighting the country’s renewed challenges to attract long term investment despite the abundance of opportunities in the local market,” financial analyst Victor Bhoroma said.
“Short term investments as represented by portfolio investments (investments in local financial securities and equities) also plunged by more than 93% to US$3.7 million in the same period, indicating a sharp deterioration in the investment climate within the last 12 months. In the first quarter of 2020, foreign investors bought a monthly average of just above US$1 million worth of shares on the local bourse, down from a monthly average peak of US$26 million in 2013,” he added.
In the last decade, the number of listed companies on the ZSE has dropped 25 percent having had 76 listed companies in 2010 which have now dropped to 57.
For perspective, The Johannesburg Stock Exchange, which is the largest bourse in the region has 344 listed companies, Nigeria Stock Exchange has 169 listed companies while Kenya Stock Exchange has 63.
Worryingly, the recent past months has seen more companies voluntarily seek de-listing with increasing company takeovers expected to further reduce numbers on the bourse.
Listed property counters, Zimre Property Investment (ZPI) and Zimre Holdings Limited (ZHL) are set to merge once negotiations over acquisition of ZPI shares by ZHL are completed.
Similarly, Dawn Properties is also set for delisting after its takeover by African Sun Limited.
With government seemingly yielding to political pressure from the ruling Zanu pf party to de-list certain companies from the bourse, analysts remain skeptical of the country stock markets.
