AUTOMATION of trading will increase volumes, make the markets liquid and improve efficiency of the price discovery mechanism and make stock brokers more profitable, Securities Commission of Zimbabwe (SECz) CEO Tafadzwa Chinamo said.
Chinamo (pictured) made the remarks in an exclusive interview with businessdigest following his recent visit to Nairobi, Kenya where SECz was official advisor to the government mission which attended the Comesa 4th meeting on Trade in Services held from July 10 to 12, 2012. SECz, the Reserve Bank of Zimbabwe and the Insurance and Pensions Commission of Zimbabwe were advising the official Zimbabwe delegation on trade issues concerning the financial services sector.
“The visit to Kenya opened our eyes to how far Zimbabwe’s capital markets now lagged behind markets in Kenya, which have moved ahead in terms of modernisation. Zimbabwe’s securities markets have been leapfrogged by Kenya’s markets in terms of market development, regulation and technology,” Chinamo said.
In Kenya, the Zimbabwe delegation met officials from the Capital Markets Authority of Kenya (CMA), an equivalent of SECz and brokers from the Nairobi Stock Exchange. The SECZ team also met Rose Mambo, CEO of Kenya’s Central Depository & Settlement Corporation Limited (CDSC) who gave a brief on the setting up of Kenya’s Central Securities Depository which commenced operations in 2004 with full mobilisation of share certificates of all NSE listed companies being fully implemented by the end of 2005.
CMA is the regulator of capital markets in Kenya. It licenses stock exchanges, security depositories, investment banks, venture capital companies, fund managers, stock brokers, money market dealers, custodians and credit rating agencies.
Chinamo said before automation, Kenya used to trade an average of US$1 million turnover a day, but it now trades more than US$3 million a day. Stock volumes in Kenya increased 300% after automation increased the overall appeal of the market.
“Kenya has now fully automated.We learnt that it wasn’t easy for them,but they got it done. It was refreshing to see a stock broker sitting in front of four computer terminals beaming live prices,” he said.
“Automating the ZSE will increase the overall appeal of the market, improve liquidity and turnover will will improve volumes and profitability for our local stock brokers,” he said
“Basically from what we observed in Kenya, the stock brokers here have to up their game in terms of ICT, they are behind,” he added.
Chinamo told businessdigest that Kenya’s market had moved far ahead of Zimbabwe’s in terms of transparency and disclosure.
“We were told that listed companies in Kenya are compelled to inform the investing public exactly why they are engaged in a corporate action such as an IPO or rights issues.
“In Zimbabwe an AGM is attended by as few as five or six members of a company but in Kenya an AGM is an affair that attracts thousands of shareholders,” he said.
The NSE had 55 listed companies but had a market cap of US$20 billion. It is serviced by 22 brokers. This is in comparison to ZSE which has 79 listed companies but a market cap of only US$3,4 billion serviced by 33 brokers.
Chinamo also observed that Kenya had an active listed bond market, driven mainly by government and municipal bond issues and the market was fairly liquid.