STRONG investor appetite for Old Mutual stocks on the Zimbabwe Stock Exchange (ZSE) has aided a recovery of equities as foreigners seek to exit their positions in the local market via the fungible stock as foreign currency shortages worsen.
BY CHRIS MURONZI
A look at stock prices in the last two weeks shows that the value of stocks has been surging, buoyed by Old Mutual, a counter with a significant weighting on the broader market.
Just last week, stocks jumped 3,17% to close at a valuation of $19,05 billion. In the prior week, stocks surged 4,34% to close at $18,47bn owing to gains in Old Mutual.
The stock, which is listed on the ZSE, Johannesburg and the London stock exchanges, is fungible and is often used by foreign investors to remit funds offshore.
Worries over constricted movement of funding to offshore destinations have been exacerbated by the foreign currency shortages in the country, forcing investors to resort to buying Old Mutual shares locally and selling them on either the JSE or the LSE to get their principal and capital gains on their Zimbabwe investments.
This has also spawned a premium between the JSE and LSE price and ZSE prices.
Analysts say the arbitrage opportunity being provided by the mispricing between the stock in markets it trades has also helped push investor interest in the stock.
As of Wednesday, the stock traded at R22,22 on the JSE or a price of GBP1,2194 in London. When converted at the reigning rate of the day, the LSE price amounted to R22,24 and was efficiently priced when compared to the JSE price. But when compared to the ZSE price, the story is different. The stock opened at a price of RTGS$11,44 in Tuesday’s trade and closed around the same price.
At a rate of US$1:RTGS$5,2 for EcoCash or transfer payments on the day, the stock would have been worth US$2,20 or R31,66 on the JSE at the same price. This implied a premium of 70% on the JSE and LSE prices on the same day.
However, the RTGS rate had on Wednesday weakened to US$1:RTGS$7,2 for electronic payments and US$1:RTGS$5. This meant that the premium between the LSE, JSE and the ZSE had come down significantly owing to exchange rate fluctuations to a price of R22,83, a price largely in line with the LSE and JSE prices for the stock.
An analysis of the market trends shows that Old Mutual is not the only counter investors are interested in.
Counters such as Econet Wireless Zimbabwe and its fintech spin-off, Cassava and AB-InBev associate, Delta, also have the keen eye of the investor.
It seems investors are going for companies with solid assets, strong fundamentals and solid returns on assets, among other attributes.
Top-tier companies have over the years proven to be good bets against rising inflation.
Since the beginning of the year, trends show that fund managers have been rebalancing their portfolios to include the big caps as strategy in hyperinflationary environments.
The mainstream all-share index ended the week 1,47% higher at 143,68 points while the Top 10 Index was up 2,15% to 137,50 points in the same period. The industrial index closed the same week 2,87% higher at 486,76 points, whilst the mining index rose 0,12% ending the week at 189,63 points. Trading in heavyweights was weak in the same week as Econet and Cassava recorded losses of 3,23% and 1,93%, offsetting a 2,5% gain recorded in Delta.
The week’s top gains were realised in MedTech, RTG and GetBucks, up 36,84%, 25,42% and 20%, respectively while the week’s biggest losses were recorded in FMP, down 13,85%, Lafarge, down 13,04% and Powerspeed, down 11,01%. Volumes traded totalled 78,84 million shares and averaged 15,77 million shares per day.
Weekly turnover totalled $38,53 million with average daily value traded was $7,71 million for the week.
Activity was highest in Old Mutual, Econet and Delta, and contributing 27,81%, 21,11% and 20,61%, respectively.
Activity was highest in Old Mutual in the week to May 13 up 24,39%.
In the prior week, the all-share index ended the week 3,16% higher at 139,99 points, while the Top 10 Index was up 3,92% to 134,62 points while the Industrial Index closed the week 4,36% higher at 473,16 points, whilst the mining index rose 2,42% ending the week at 189,39 points.
Activity was highest in Old Mutual, Cassava and Delta, and contributing 24,39%, 18.93% and 18,27%, respectively.