ZIMBABWE Stock Exchange (ZSE) CEO Alban Chirume says the country urgently needs a bond market as an alternative market for listed companies seeking debt against a backdrop of an underperforming local bourse that has blighted capital raising initiatives.
The ZSE has been making losses for nine consecutive months with market capitalisation plunging, reflecting a weak investor appetite.
The bond market primarily includes government-issued securities and corporate debt securities, and facilitates the transfer of capital from savers to the issuers or organisations requiring capital for government projects, business expansions and ongoing operations.
Chirume told businessdigest in the capital this week that the trading and issuance of debt securities could stimulate activity for most undercapitalised firms on the ZSE badly in need of fresh funding to retool and become competitive.
He said the ZSE has already finalised on the framework of the proposed bond market and is awaiting regulatory approval.
“The exchange is currently experiencing one of its worst performances since dollarisation and the bond market provides an alternative market for companies to raise funds,” Chirume said.
“The issue of capital gains tax which the market is lobbying for its removal has made the exchange one of the most expensive in the region.
“The beauty of a bond market is that companies can get debt without diluting shareholding and that has become a viable option in most markets.”
Market watchers say key policy announcements such as the recently announced national budget and the signaling of multi-billion dollar infrastructure deals between Zimbabwe and China has failed to stimulate activity on the ZSE, flagging the urgency of an alternative market.
At current figures, half of actively listed companies on the local equities market could be forced to delist or downgrade to a secondary bourse if they fail to meet a proposed listing threshold of US$10 million if new listing requirements are signed into law.
The ZSE will also have a two tier system that could result in some listed companies requiring fresh capital or exit the main bourse.
The local bourse has proposed to set US$250 000 as the minimum share capital for companies intending to list on the planned secondary exchange, an alternative bourse to be known as the Zimbabwe Emerging Enterprising Market.