No Share Trading as ZSE Reopens

AFTER three months of inaction, the Zimbabwe Stock Exchange resumed trade yesterday with only Apex Corporation trading after all the other counters found no takers.

There was a big spread between buyers and sellers. Buyers offered prices  “way below”  what sellers were asking for.

Most buyers were between one and five cents while sellers were between 25 cents and 45 cents.

Interfin, the only active counter, bought 3 026 Apex shares at 1 US cent during yesterday’s trade.

A total of 35 counters were offering prices ranging between one and 20 cents.

The best five offers yesterday were Lafarge US$1,30, KMAL and BAT US$1,20 and RioZim and TA Holdings which were offering US$1,00.

Trading was brought to a halt on the ZSE on November 20 after Reserve Bank governor Gideon Gono read the riot act to banks that were using fraudulent cheques to artificially inflate share prices.

The halt was further extended after the country’s Securities Commission ordered stockbrokers to submit audited financial reports of their net worth by the end of December 2008.

The commission warned broking firms that they would be closed if they failed to meet the deadline.
ZSE chairman Seti Shumba yesterday said they discussed about tariffs, fungibility and asset management companies at their meeting with the Minister of Finance on Wednesday.

“For purchases a brokerage fee of 2% was agreed, although we wanted 1% but he (Tendai Biti) wanted 2% to boost value at tax,” said Shumba.

Stamp duty was agreed at 0,5% while Value Added Tax would be 15% of brokerage fee.

“If the Minister of Finance wanted more revenue, it would have been more efficient to raise the stamp duty to over 0,65% and reduce the brokerage to 1%,” Shumba said.

For sellers, 2% would be charged for brokerage, while 15% would be paid for value added tax.

Shumba said fungibility was restored for all dual listed counters and a letter to that effect was on its way to the Reserve Bank.

“We suggested that asset managers be brought under the Securities Exchange Commission so we can share the burden with them in funding them and be in line with international practice. A letter is also on its way to the Reserve Bank announcing the change,” said Shumba.

Trade on the bourse is now supposed to be backed by a letter of confirmation from a bank chief executive officer.

Although Biti and the Securities Exchange Commission agreed to resume trade remained unresolved.
ZSE also took a long time to resume trade because it said they were investigating acts of insider trading which had caused some counters to inflate, depress or cause fluctuation of shares.

In a statement to the Reserve Bank and Ministry of Finance signed by Munyukwi and chairman Seti Shumba, the local bourse said it was investigating all reported cases as it was a serious offence.

“The ZSE committee has also observed with concern that there are some relatively large institutions which have capacity and strategic macroeconomic information which is used to inflate, depress or cause fluctuations in the prices of securities in breach of the Securities Act (Chapter 24:25) Section 96 (2),” said ZSE.

“This is considered a very serious offence and will be subjected to investigation in order to determine complicity under the securities Act,” the stock exchange said.

The ZSE committee said it had not yet ruled on the issue of defaulting members that were revealed by the Reserve Bank last year.

“It (activity on the stock market) was simultaneously escalated to the public domain as the report was being brought to the attention of the committee,” the ZSE said.

The ZSE said the procedure as prescribed in Rule 11.01 for bringing this issue, as well as other complaints about members, has not been varied or waived.

“The ZSE committee has a primary duty to appraise the discovered evidence and then set out to prove the breach. The committee must then follow procedures as laid down in rules 11.01-11.12,” said the ZSE.

The stock exchange committee said it would consider the question of final re-admission of any defaulter in two different classes according to rule 11.12 namely:

(i) Cases of failure arising from default of clients or from other circumstances where no bad faith or breach of the rules and usage of the exchange has been practised.

(ii) Cases marked by indiscretion and by failure to exercise reasonable caution on the part of the defaulter.
“The ZSE Committee will examine any such evidence provided in investigating the matter through normal channels,” the ZSE said.

The stock exchange committee also said it will call for all participants to be subjected to interviews regarding the circumstances of the alleged breach and weigh the evidence to establish the underlying motives for suspicious conduct and behaviour by the members as innocent, negligent or fraudulent.

“The quality of the evidence must be such that it is admissible in open court so as to provide a successful prosecution and ultimate conviction if the need arises,” the ZSE said.

The committee said it shall ensure that the rules of natural justice are applied and observed by taking all reasonable steps to ensure that every person whose interests are likely to be affected by the exercise of the functions is given adequate opportunity to make representations in pursuit of fairness.

Commenting on purchasing and settlement risk, the ZSE said a precedent was observed in the current difficulties in which bank cheques were dishonoured.

“This put the entire market at risk as there was no longer any guarantee, even by the designated authorities in the bank that their own paper and what they have signed for can be rendered disabled.
Therefore no other paper will be acceptable to stockbrokers for the purchase of shares,” said the ZSE.

BY PAUL NYAKAZEYA