A SHIFT from emerging markets triggered by weakening commodity prices among other factors resulted in the Zimbabwe Stock Exchange (ZSE)’s Automated Trading System (ATS) handling transactions worth US$88 million during the second half of the year compared to trades worth US$140 million registered in the first half prior to automation, ZSE figures shows.
The ATS, which only went live on July 6 2015 to replace the manual platform, was expected to improve efficiency and drive volumes of stocks traded.
Despite being one of the oldest in the region, the local bourse had been lagging in automation — using the widely criticised open outcry system which analysts say is slow, unwieldy and costly.
ZSE CE Alban Chirume said a decline in turnover, which worsened during the second half of 2015, was attributed to among other factors, depressed global commodities which impacted on the revenues and performance of mining and agricultural counters, a decrease in consumer spending and savings as a result of the challenging economic environment, weakening of regional currencies as well as a shift from emerging markets by foreign investors.
During the year under review, institutional investors also reduced their exposure on the ZSE due to poor yields. Interest in the ZSE’s blue-chips — Delta, Econet, Innscor, Old Mutual and Seed Co — has been on the wane.
Heavyweight counters lost significant value of their share prices only reducing the appeal of the ZSE as selling pressure mounted on investors.
High interest rates necessitated by high country risk has also made the cost of borrowing unsustainable for business thereby making them uncompetitive. Resultantly, volumes for manufacturing concerns on the ZSE have been affected.
“Just to give a holistic picture, you will also note that as at 31 December 2015, the ZSE had a market capitalisation of US$3,07 billion, down from US$4,33 billion as at 31 December 2014; with a total market turnover of US$228,6 million, also down from US$452,9 million for year ended 31 December 2014,” Chirume said.
“However, we believe that the current challenges should not stop us from planning long-term as technological advancements are no longer a competitive tool amongst exchanges but a necessity.”
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.
“ In some instances, listed companies are producing goods at a higher per unit cost in comparison with imported goods due to the use of antiquated machinery which has an impact on their performance, profitability and attractiveness to investors,” he added.
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.
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.
ZSE turnover reached lowest levels last October since the market started trading in multiple currencies on February 9 2009.