FOREIGN buyers are deserting the Zimbabwe Stock Exchange (ZSE) in record numbers, with net outflows of US$56,28 million recorded in the 10 months to October, from US$305 714 recorded during the same period last year.
According to the ZSE, this is the biggest sell-off since 2011.
A barometer of investor sentiment, the ZSE has been drifting lower in recent months as foreign investors, who have carried the market in the absence of local investors, continue to leave the market.
During the past three years, foreign investors have made up over 60 percent of ZSE trades.
The decline in foreign participation on the bourse is a result of a number of factors, which include government’s introduction of bond notes, and a weak economy and delays in settling cross-border transactions by local banks.
Last week, the National Social Security Authority (NSSA) increased its shareholding in listed short-term insurer, NicozDiamond to 43 percent from 28,2 percent after purchasing stakes held by LAG Malta belonging to foreign investor Noel Hayes who held 4,3 percent and Bruce Campbell who held about 9,7 percent shareholding.
The transactions were done in block deals spread over several days on the ZSE. Under ZSE rules, NSSA has now breached the 35 percent mark which requires them to make an offer to minorities.
This deal was sealed during a week in which foreigners remained net sellers, with purchases of US$41 258 and sold shares worth US$2,6 million.
As such, the local bourse recorded 41 percent foreign participation in the week under review.
During the week ended November 11, foreigners were net sellers, with purchases of US$910 866 and sold shares worth US$1,76 million.
While economic and company performance remains weak, sentiment is mainly being driven by delays in settling foreign obligations transacted on the ZSE, which have all but made a mockery of the bourse’s settlement system at a time the industry was moving towards a shorter settlement cycle.
Generally, if funds are held up for over five days, investors cannot re-invest quickly. A shorter cycle builds up liquidity.
Settlement of dividends and investment proceeds is on top of the priority list created by the Reserve Bank of Zimbabwe’s (RBZ) for foreign payments.
However, most investors have experienced delays of over a month in the remittance of proceeds by banks.
The RBZ, together with the ZSE, had given assurance that settlement of trades would be a top priority but the situation has been clearly the opposite.
The RBZ had noted that settlement assurance is vital for the market to retain and keep attracting investment from outside the country.
Global investors, the central bank said, needed to be assured that if they traded in Zimbabwe, their trades would settle seamlessly.
The stock market grew fastest in October this year, with analysts attributing the increase to investors scurrying for safe haven equities in the face of bond notes introduction.
In October, market capitalisation increased by 22,13 percent, from US$2,7 billion in September to US$3,3 billion, the highest since November last year.
Turnover during the period under review increased by 77,8 percent to reach an all-year high of US$23,2 million, the highest since June 2015.
Financial Gazette