FOREIGN participation on the Zimbabwe Stock Exchange (ZSE) is expected to improve in 2013 as interest towards Zimbabwe improves and foreign investors seek to take positions ahead of the forthcoming elections, a leading securities firm has said.
Report by Taurai Mangudhla
In its 2013 Zimbabwe Equity Strategy Outlook, Invictus Securities (Invictus) said foreign participation on the local bourse has improved steadily from 35,4% when the country formed an inclusive government and adopted a multiple currency regime in 2009 to more than 47,2% of total value traded in 2012, and the trend is expected to continue in the current year.
Since 2009, foreign investor participation on the ZSE averaged 40% while the balance was accounted for by local investors. This is a reversal of previous times when foreigners accounted for the majority of trades on the ZSE.
Foreign investors have adopted a wait-and-see attitude as they fret over the indigenisation policy, which compels all foreign-owned companies to surrender majority shareholding to local Zimbabweans.
Implementation of the empowerment policy, according to Invictus, is likely to remain relevant, with those companies that are yet to comply trading at discounted valuations ahead of elections.
“The increase in foreign participation on the ZSE in recent years is very positive and we expect this trend to continue post elections.
The forthcoming elections present a good opportunity to demonstrate that the country is maturing as a democracy and is rapidly becoming a more attractive investment destination for investors,” said Invictus in the report.
The firm expects investors to take positions and seek safety in blue-chip counters ahead of elections and turn to mid-cap stocks on the basis that the country is poised for a strong recovery in 2014, with the forthcoming elections being the catalyst for sustainable growth and development.
“A credible and peaceful election has the capacity to ignite significant share price re-rating, especially among mid- cap counters,” said Invictus. It added appetite for capital remained high among ZSE -listed counters and 2013, with credible elections likely to trigger a spate of hugely successful capital calls.
“Regardless of the outcome of elections we firmly believe that the new government will adopt a more investor-friendly approach in order to raise much-needed capital for expansion and job creation.”
Invictus said the ZSE remained depressed and market activity was subdued, with the industrial index remaining flat while the ZSE mining index declined by more than 60%, reflecting a lack of investor confidence.
Despite the significant improvement in corporate profitability since 2012, share prices have remained largely static. Despite the marginal increase in turnover in 2012 from US$ 447,5million to US$ 448,2million, volumes declined significantly from 4,4 billion to 3,5 billion shares. The securities firm argued the local bourse has significantly lagged its regional peers primarily due to negative perception of Zimbabwe among investors.
It is, however, expected the market will reach US$5,1billion market cap in 2013, implying a 30% upward trend.