Whither ZSE liquidity crunch?
By Stanley James
The liquidity crisis that has affected the day to day transactions for the Zimbabwe Stock Exchange (ZSE) market are becoming a major cause for concern as there appears to be no end in sight to the challenges bedeviling the bourse.
At a time when the ZSE is expected to play an important role in terms of economic recovery, limited revenue inflows are threatening the importance of the market in generating revenue for the economy.With limited investor participation becoming the order of the day, one really wonders what is happening to the market which had emerged as the third best performing bourse in sub-Saharan Africa.
This has therefore raised many questions than answers. To what extent can stakeholders unlock fresh revenue inflows? Are there any possible avenues for the market to regain its form? To what extent can the ZSE attract new investors is there a positive outlook or the market?
While many investors have embarked on a wait-and-see attitude towards the local stock market on the back of thin trading volumes due to depressed or low prices, stockbrokers revealed that this is the time for punters to buy their shares as in the long run they stand to benefit.
But taking into account some risks associated with investing in stocks, the ZSE has been characterised by uncertainties that are scaring away investors.
This has resulted in the total value of shares exchanging hands on the market or the market capitalisation remaining stagnant at US$3,3 billion from theÂ December 2009 levels.
However, there is hope that the fiscal authorities might come up to the rescue of the market in the much anticipated Mid-Term budget penciled for July 15 this year, amid expectations that Finance Minister, Tendai Biti will also provide the basis towards the demutualisation of the market.
The process will result in the ZSE trading as a separate entity, a move that is likely to generate revenue inflows.
Only blue chip counters such as Old Mutual, CBZ Holdings, Delta Corporation, PPC and Innscor, have managed to attract several investors since January this year, mainly due to the fact that they (the counters) have a potential of yielding attractive returns, but given the fact that the heavyweight counters share prices are beyond the reach of many investors, then the market faces another tough hurdle in that aspect.
I disagree with the notion that the recent indigenisation and empowerment policy introduced by government has contributed to low investor participation, because even before the introduction of the regulations earlier this year, the market has been on a slide since the introduction of the multi-currency system on February 16, 2009.
Statistics even show that foreign investors have since January this year accounted for 60% of the total participation with locals contributing 40%.
What is needed is a real workable approach to tackle head-on the challenges affecting the market which have made it difficult for listed companies to seek funds for recapitalization on the market in the form of rights issues.
It is not that time to focus on external financiers, as homegrown policies can emerge as the best platform for the market to recover from the financial doldrums.
With only two counters listing this year by the way ofÂ reverse takeovers of the existing counters, then a lot still needs to be done by the ZSE authorities inÂ convincing the business community that the market still remains buoyant as well as a safe haven for investments.
By and large, the financial problems affecting the market should be solved as a matter of urgency for the benefit of investors and economic recovery.