“Currently our capitalisation is just above US$3 billion and is falling, but if we attract big companies to list, especially in the mining and banking sectors, we can grow the size of the market up to levels of US$10 billion.” These brave words come from the new chair of the management committee of the Zimbabwe Stock Exchange (www.zse.co.zw), Ndodana Mguquka.
He added, according to a report in the Zimbabwe Independent newspaper (www.theindependent.co.zw): “As the new executive committee, we are looking forward to reviving the ZSE. At the moment there are a lot of issues that need to be sorted out, particularly the quality of our listings. We need to improve the quality of our listings to attract foreign and local investment.”
On 14 July, Finance Minister Tendai Biti had given a good summary of the ZSE’s woes in his 2010 Mid-Term Fiscal Policy Review (www.zimtreasury.org) to Parliament. He said: “Trading on the Zimbabwe Stock Exchange has largely been low, mainly due to market illiquidity in the first half of the year. Foreign participation has remained subdued with investments mainly confined to portfolio restructurings. Corporate results have also failed to uplift the equity market as most corporate are still undercapitalised and also suffering from subdued demand.”
He said that on average takeup of recapitalization rights issues had only been 50%, and underwriters had taken the balance.
“The industrial index which started the year at a high of 156.52 had dropped to 127.46 by June 2010, whilst the mining index fell from an opening of 209.8 to 143.08. Similarly, market capitalisation fell from US$3.97 billion in January 2010 to US$3.19 billion by end of June 2010. The poor performance is as a result of investors pulling out their investments reflecting depressed investors’ sentiment over perceived financial risks, especially following gazetting of the Indigenisation Regulations on March 1.
“In particular, foreign investors’ contribution to market turnover fell from between 40-50% to an average 20% per month.”
Mr Mguquka is the Managing Director of New Africa Securities. The management committee manages and controls the ZSE, settles disputes between members, examines all applications for listing securities for trading on the exchange, and enforces listing requirements with powers to grant, review, suspend or terminate listings so that securities would no longer be tradeable on the bourse. He took over from Bart Mswaka of Renaissance Securities who remains as his deputy.