THE average dematerialisation (demat) penetration ratio across all counters on the Chengetedzai Securities Depository (CSD) platform has remained static at 45% in the past five months, with the depository pushing for the implementation of initiatives that impact positively on the ratios.
By Melody Chikono
Dematerialisation is the process of converting physical share certificates into electronic balances, and only dematerialised shares a can be traded.
Dealing in demat format is beneficial to investors, brokers and companies alike as it reduces the investors’ risk of holding shares in physical format while reducing the risk of delayed settlement, and enhances profit through the increased participation of brokers. However, in Zimbabwe there is no legislation at the moment that compels investors to hold securities in electronic form, but CSC chief executive Campbell Musiwa says the ideal arrangement is that they be held in that form.
In the month of July, Proplastics, Masimba Holdings and Art Corporation maintained their top positions with demat ratios of 98%, 97% and 96% respectively.
Musiwa noted that while the majority of the shares that have not been dematerialised relate to long-term strategic shareholdings by investors, these shareholders either have comfort in having their physical scrip or are discouraged by the huge costs of managing the portfolios.
“At the moment there is no legislation that compels investors to hold securities in electronic form. However, only dematerialised shares can be traded. The majority of the shares that have not been dematerialised relate to long-term strategic shareholdings by investors. These shareholders either have comfort in having their physical scrip or are discouraged by the huge costs of engaging a custodian to manage a passive portfolio (a cost they will not incur when keeping physical certificates),” he said.
He added that CSD has several initiatives, with one being the Business Partnership Framework. Introduced in 2015, this allows certain classes of investors to link directly to the system and be a custodian for their own transactions at substantially reduced cost.
Some of the initiatives are yet to be implemented, but are all aimed at impacting positively on the demat ratios.
CSD processed 1 209 securities deposits in the month of July 2019, bringing the cumulative number of securities deposits processed since going live to 83 399.
This comes as the Zimbabwe Stock Exchange (ZSE) experienced a fall in trading volumes during the month with a turnover of ZWL$196,2 million compared to ZWL$235,5 million for the month of June 2019 while the ZSE Equities market capitalisation decreased in value by 11,7%, completing the month of July at ZWL$24,6 billion compared to ZWL$278 billion as at June 30, 2019.
The fall in equities has been attributed to the decrease in market capitalisation to normal market volatility as investors try to crystallise on the gains made.
Profit-taking activity tends to follow periods of increasing prices on the market.
The introduction of the vesting period on dually listed stocks drastically reduced the supply of Old Mutual Limited shares on the ZSE and also resulted in reduced activity in other counters that some investors were selling before buying Old Mutual Limited shares.