Thursday, January 21, 2010

Zimbabwe Stock Exchange (ZSE) market cap breaches $4bn mark

By Darlington Musarurwa

THE upward trajectory of the Zimbabwe Stock Exchange (ZSE) has continued, with market capitalisation breaching US$4 billion, raising expectations that the forecast US$7 billion cap projected by the end of next year will be attained.

Overall market capitalisation of the bourse topped US$4,21 billion on Tuesday, jumping from US$4,08 billion realised the day before. However, trading volumes, on average, continue to fluctuate marginally above US$2 million.

By mid last week, telecommunications firm Econet Wireless remained as the market leader in terms of capitalisation, with its market cap quoted at US$819 million.

Beverage manufacture Delta was second at US$568 million followed by Innscor and Barclays at US$351 million and US$258 million respectively.

Market research experts opine that market capitalisation might soar to US$5 billion by the end of the year.
Both domestic and international investors tip the ZSE — once Africa’s third largest exchange — to continue rising.

The exchange still lags markedly behind Johannesburg Stock Exchange, whose market capitalisation is estimated to be US$280 billion, and East Africa’s biggest bourse, Nairobi Stock Exchange, whose market cap was US$12 billion last year.

But market watchers expect that the political dynamics will remain critical in trading trends going forward.

“Trading on the local stock exchange has come a long way since resumption of trading in hard currencies on February 19. Confidence has been gradually building up as the inclusive Government consolidated its gains.

“Investors are bullish about the future prospects of the bourse and it is generally expected that, all factors being equal, market capitalisation might rise to US$5 billion or even more.

“The country is continuing to showcase to the international market investment opportunities in the country and this might also to some extent positively impact on both trading volumes and trading activities.

“Arguably, the tourism investment summit, scheduled for February, is one of the main domestic highlights for the year.

“But developments on the political front, especially the relationship between the major political parties constituting the inclusive Government, are key to dictating the pulse of the market this year,” said an investment analyst with a local securities company.

The Ministry of Finance forecast last year the country’s economy will grow by 7 percent in 2010 from 4,7 percent last year.
Also, ZSE chief executive officer Mr Emmanuel Munyukwi said in an interview last year there was a positive correlation between the two-day international investment conference that was held in July to trading activity.

Africa Investor Tourism Investment Summit is tentatively set for February 15, while the country will also play host to the Corporate Governance in Africa Summit in March.

Despite the performance of the local bourse, activity has mainly been constrained by the dispute over investment levies that at 7,5 percent were markedly higher than those obtaining in the region.

Government recently slashed the fees to 3,2 percent.

“This reduction in the total cost of trading on the ZSE is likely to result in renewed interest in the market since some investors were deterred by the high charges and were opting for the money market.

“Such renewed interest should result in an increase in market turnover with consequent increased business for all the stakeholders on the bourse, including Government.

“Hitherto, the equities market had become illiquid as it had become expensive to buy and sell shares, the cost of which would not be compensated by the performance of the bourse which has been fettered by liquidity challenges affecting the economy,” said Kingdom Financial Holdings in a 2010 post-budget review.

Government said during the recent listing of TN Holdings on January 4, it plans to privatise at least three State-owned enterprises and list them on the ZSE this year. Market speculation point to TelOne, which was recently considered to be in talks with South Africa’s Telkom, Ziscosteel and Air Zimbabwe, as the primary target for Initial Public Offers (IPOs).