ZSE Crisis Affects Pension Funds And Insurance Companies

THE survival and “smooth” operation of  pension funds and insurance companies will be affected by lack of activity on the Zimbabwe Stock Exchange after the Reserve Bank came up with “riot” measures to root out rampant speculative activities that were inflating share prices.

Analysts who spoke to businessdigest this week said pension funds and life insurances whose significant amount of earnings was generated from trading on the stock market will have to seek alternative ways to invest their money as their earnings were locked in the stock market.

“The value of assets is meant to be coming up at the same rate with inflation but at the moment these assets have not been performing for the past three weeks which means their value is depreciating,” said Witness Chinyama an economic analyst with Kingdom Bank.

Hillary Chikomo an accountant with Fidelity Life Assurance said investments on the stock market were losing their value because there was no trading on the local bourse.

“The local currency is not worth much because even if firms dispose of the shares today they can not do much with them, it is better to go into the property markets where rentals are now in line with hard currency,” said Chikomo.

He said it was almost impossible for insurance companies and pension funds to map the way forward without trading in foreign currency.

An official with Nicoz Diamond said no one was buying on the stock exchange and because of that they have not been able to crystallise their portfolios.

“As insurance houses, we have been quite dependent on investment projects as we have not been generating much from our core business because of the current economic environment,” the official said.
ZB bank, group economist, Best Doroh said lack of trading on the stock market was a “huge blow to pension funds and insurance companies considering that the money market was characterised by low rates”.

“It becomes difficult because if there is no activity on the stock exchange where else do these (pension funds and insurance companies) firms invest?”

Doroh said such a situation did not give pension funds and insurance companies much choice to rearrange their portfolios.

Chinyama said this development could make it difficult for pension funds to pay out beneficiaries.
“The longer the situation takes to normalise, the greater the damage being done to these pension funds.
 “It depends on whether the situation is reversed because the current set up is cumbersome. Bank chief executive officers also want to avoid the risk of being arrested,” Chinyama said.

The Nicoz Diamond official said the only way to they could remain relevant was to preserve value by hanging on to stock that is available instead of offloading in the hope that there
would be a turnaround on the local bourse.

By Jesilyn Dendere 

 

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