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Highlights of the ZSE in 2015

FORMER US Council of Economic Affairs chairperson Christina Romer once said the historic stock market crash of October 1929 did not destroy a particularly large amount of wealth or make people highly pessimistic. Rather, it made companies and consumers very unsure about future income and also led them to stop spending as they waited for more information.

Bernard Mpofu

Nearer home, a cloud of uncertainty gripped the country on August 5 2013, now known as the Black Monday when the Zimbabwe Stock Exchange (ZSE) plunged 11%, its biggest one day decline since 2009 after President Robert Mugabe won a presidential election.

Since then, Zimbabwe’s economy as reflected by the performance of the local bourse, has been wobbling with market watchers calling for more structural reforms to stimulate activity.

In our first issue of the year, the Zimbabwe Independent looks at some of the major highlights of the ZSE in 2015.

Headwinds headlined the performance of the ZSE in 2015 with most institutional investors such as pension funds reducing their exposure on the equities market as they revised investment portfolios. Earnings were lower as revenue declined on the back of weakening demand.

Interests in ZSE blue chips waned and as time progressed foreign participation took a knock. Heavyweight counters lost significant value of their share prices only worsening the attractiveness of the ZSE as selling pressure mounted on investors.

ZSE market capitalisation plunged to US$3 billion as at December 31 from US$4,3 billion in January. The benchmark industrial index which opened the year at 167,16 points, dropped to 114, 85 points. The resources index on the other hand dropped to 23,72 points from 55,38 points.

By June, market capitalisation had plunged to US$3,8 billion in the first half of 2015 from US$4,8 billion during the same period last year, losing US$1 billion in value.

Stockbrokers pressed the panic button after it emerged that only a fifth of Zimbabwe’s stockbrokers are currently generating enough commission to survive as the local bourse continues to underperform, reflecting a weak underlying economy.

The underperformance of the local bourse — a key economic performance barometer — continued to reflect a slowdown in economic growth after total market capitalisation eased by 0,8% to US$3,6 billion from US$3,63 billion, marking a persistent bearish run for nine consecutive months .

ZSE turnover reached lowest levels in October since the market started trading in multiple currencies on February 9, 2009 was recorded in April of the same year when the value of shares traded stood at US$11,6 million.

Following a two-month suspension in share trades preceded by an unprecedented economic meltdown characterised by runaway hyperinflation and acute foreign currency shortages, the ZSE resumed trade in 2009 with monthly turnover standing at US$2,5 million before registering an increase of US$500 000 in March.
While the mining index was largely inactive, two important things happened to one of the counters on the resources index.

BNC which successfully raised capital through a US$20 million bond to restart its smelting complex had its parent company’s founder kicked out through a dramatic boardroom coup.

Kalaa Mpinga, 55, in June was forced out of Mwana following a series of clashes with majority Chinese shareholders and a group of minorities, a day after an extraordinary general meeting in London ousted his allies from the board.

China International Mining Group Corporation (CIMGC) came on board in 2012 with a US$21 million investment to restart Mwana’s Bindura Nickel Corporation (BNC).

Heralded as game-changing developments, the ZSE implemented some of its outstanding projects such as the Automated Trading System which made the local bourse not only play catch up with regional exchanges but improve efficiency despite being one of the oldest in the continent.

The long-awaited electronic platform, a marked shift from the older and tedious paper based system at launch in June raised expectations that trades would quadruple with investors eyeing the ZSE. But that was not to be. Structural issues continue to confront the economy that has been underperforming.

The road towards the long awaited demutualisation of the ZSE gathered pace in March when shareholders received share certificates of the new company.

The new initial shareholding structure is split 32:68 in favour of government and ZSE’s stockbrokers respectively.

Currently the ZSE is undergoing the registration of the new entity as a stock exchange and the transfer of assets and liabilities from the existing entity to the new entity. ZSE will also change its name to Zimbabwe Stock Exchange Ltd once all demutualisation processes are completed.

As the informalisation of the economy gathered pace with some small to medium enterprises thriving, the ZSE crafted new listing requirements for startup businesses in January. The ZSE proposed to set US$250 000 as the minimum share capital for companies intending to list on the country’s planned secondary bourse, Zimbabwe Emerging Enterprising Market (ZEEM.)

On December 7 2015, the ZSE joined the United Nation’s Sustainable Stock Exchange Initiative as a Partner Exchange, becoming the 8th African Exchange to do so.
Stock exchanges are a forum to learn from each other on how transparency can be achieved through collaborating with capital markets’ stakeholders on environmental, social and governance matters as well as foster sustainable investment.

Popping champagne bottles A few toasts were raised albeit limited for unbundling companies as the Initial Public Offering drought continued unabated.
Apart from a series of unbundling activities that saw Dawn Properties, Red Star Ltd, Zimbabwe Property Investments and Pearl Properties Ltd, Padenga Proplastics and Simbisa being listed in the last 12 years, new listings have been few and far between in Zimbabwe.

The ZSE welcomed Proplastics to the Official List on June 8 2015, becoming the first listing since 2012. Simbisa Brands was listed on November 6 2015, becoming the first listing after automation of the ZSE.

On December 7 2015, the Initial Public Offering for GetBucks Financial Services Ltd opened, with the listing expected in January 2016.

Now with 60 counters, the ZSE at its peak had 79 counters trading. Over 10 counters have delisted from the ZSE in the past five years. Counters that have been struck off the ZSE register include African Banking Corporation, Astra Holdings, Tractive Power, Interfresh Holdings and PG Holdings among others.

During the year under review, three listed companies escaped censure from the Securities and Exchange Commission of Zimbabwe following a three-month investigation over alleged price manipulation.

SEC cleared financial group ABC Holdings, Fidelity Life Assurance Company and agro industrial concern Zimplow of price manipulation charges last week stemming from questionable rallies involving their shares.

The outlook
After shaving of US$1,3 billion in 2015, market watchers contend that the exchange will continue to suffer in 2016 in the absence of a stimulus package in the economy. Latest statistics obtained from the ZSE show that 29 out of 60 listed firms have a market capitalisation of below US$10 million.

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