FEAR of the impending introduction of bond notes by the Zimbabwean government has sent Old Mutual Plc’s share price on the Zimbabwe Stock Exchange (ZSE) sky rocketing ahead of its trading prices on the Johannesburg Stock Exchange (JSE) and the London Stock Exchange (LSE).
By close of trading on Tuesday, Old Mutual’s shares listed on the ZSE had traded at US$3 – a 13,01% premium to its trading price on the JSE as at 15:33.
The price is also a 12,93% premium to the trading price on the LSE as at 14:33.
The bull-run on OML’s ZSE listed shares started mid-June 2016 after the Reserve Bank of Zimbabwe increased fungibility limits of Old Mutual shares to 49% from the previous 40%.
The increase in fungibility means shareholders who bought Old Mutual shares on the ZSE can dispose them in other markets for better returns.
Old Mutual is primarily Listed on the LSE with secondary listings on the JSE as well as on the Malawian (MSE), Namibian (NSX) and Zimbabwean (ZSE) stock exchanges.
At the time of increasing fungibility back in June, investors on both the JSE and LSE were paying approximately 17.5% more per share than the then prevailing price on the ZSE.
The price gap presented arbitrage opportunities for investors holding Old Mutual shares in Zimbabwe. At the time shares eligible for removal were more than 8.2 million.
The situation has, however, changed with the share price on the ZSE now above the trading price on both the JSE and LSE.
This means there is no arbitrage opportunity for investors holding OML’s ZSE listed shares to sell them on the JSE or on the LSE.
This has, however, not stopped investors from piling in on the stock, which is seen as a store of value by many.
Analysts said the other reason why investors were paying a premium for OML’s ZSE listed shares was that they were desperate to find a home for their cash ahead of the introduction of bond notes.
“Most Zimbabweans see the introduction of bond notes as a disguised way of introducing the controversial Zimbabwean currency. So they would rather buy shares of a reputable company, with little local risk, as a hedge against the impending local currency,” said analyst Walter Mandeya.
The Zimbabwean government, however, insists that the introduction of bond notes would be good for the struggling economy.-Fin24'