2014 financial sector highlights

28 Dec, 2014 - 00:12 0 Views
2014 financial sector highlights

The Sunday Mail

AFTER a mini rally in the first half of the year, bears returned to the Zimbabwe Stock Exchange (ZSE) as investors remained worried about the pace of economic recovery, or lack of it.

Market analysts had warned that equities were likely to continue drifting sideways until year-end on weaker economic growth, liquidity shortages and poor corporate performance, and true to that, the market fell heavily, losing close to US$600 million since the beginning of the year.

By close of trade on Tuesday, ZSE’s market capitalisation was US$4,3 billion, betraying forecasts of US$6 billion that were predicted for the local bourse by close of this year.

A post election synopsis done by FBC Securities spelt out that sustainable economic development was a distinct possibility suggesting that the stock market would stabilise once there was some degree of certainty in the direction in which the new government would take the economy.

It forecasted a target market capitalisation of US$6.2 billion for 2014

On a year to date basis, the mainstream industrial index fell 20 percent to 162 points from 204 pointes recorded on January 3.

The mining index however gained 44 percent since beginning of the year to 66,31 points buoyed by good performance in nickel producer Bindura.

Over the year, minings have touched a high of 105,13 points and a 27,97-point low.

Throughout 2014, big market caps were expected to drive a bull-run on the stock market. But liquidity challenges remained a stumbling block preventing the market from realising its full potential.

Total value of trades for current year to date among the usual market movers Delta, Econet, Innscor, CBZ Holdings, OK Zimbabwe, BAT, Hippo, Old Mutual, National Foods and Dairibord fell sharply compared to the same period last year.

SMEs Stock exchange

As liquidity challenges continued to bite on all sectors of the economy, some analysts have called for the clean-up of the ZSE by relegating some companies to a smaller market, that is the SMEs stock exchange.

These have argued that some listed firms on the ZSE are no longer fit for the main stock market and do not qualify to be listed, not even on an SMEs bourse in developed nations, because of poor business models and weak capitalisation,

Analysts said many listed firms had failed to adapt their businesses to enhance productivity and competitiveness since dollarisation in 2009.

As a result, they found themselves nursing unsustainable debts in an illiquid economy characterised by low investment.

In developed countries such as the United Kingdom, an SME is any company whose market capitalisation is US$5 million and below, while in Zimbabwe it is a company worth half a million dollars and below.

Companies such as Zeco Holdings worth US$46 000 would be easily relegated to the SMEs bourse.

Others such as General Beltings- US$107 318, Pelhams – US$99 000, Medtech- US$839, 890 would be in the SMEs bourse in the UK and would not qualify for the mainstream stock exchange.

Many companies have been battling the liquidity crisis that followed in the aftermaths of the multi-currency regime, and have resorted to borrowings from banks to finance their old models.

Some of them choked from the escalating debts on top of their general lack of competitiveness and inappropriate cost structures.

Automation

Despite the sad picture painted on the ZSE this year, the local bourse successfully short-listed four companies for the supply and installation of the Automated Trading System (ATS).

The system is expected to be running in the first quarter of 2015, although it has been on the agenda since year 2000.

The ATS is expected to treble daily turn over at the local bourse. ATS will also allow stockbrokers to trade from anywhere.

On the other hand, the ZSE introduced the Central Securities Depository (CSD) in which investments are kept in electronic form for ease of trading and safe keeping by custodians.

The system replaces paper share certificates. At least 44 counters were trading live on the CSD. The CSD is implemented by Chengetedzai Depository Company (CDC).

Bond Market

The ZSE announced plans to introduce a bond market and in November had started work on the regulated platform for the listing and trading of debt securities.

Invitations were sent out to stakeholders seeking their input on the first draft of requirements as per ZSE debt listing rules.

Company CEOs who resigned in 2014

Year 2014 also witnessed some chief executives of listed companies leaving for other interests elsewhere while others assumed higher offices.

Notably, the Reserve Bank of Zimbabwe Governor Dr John Panonetsa Mangudya left his post as group chief executive for CBZH after his appointment to head the Apex bank in May.

Dr Mangudya took over from Dr Charity Dhliwayo who headed the central bank in an acting capacity after the bank’s former chief Dr Gideon Gono left in 2013.

In October alone, Mr Ashton Ndlovu left his CEO position at the RioZim while Mr James Mushore also jumped ship from the National Merchant Bank of Zimbabwe (NMBZ). Mr Mushore was one of the founders of the financial concern.

ABC Holdings founding CEO Mr Doug Munatsi stepped down from the top post following the financial group’s takeover by an investment company Atlas Mara.

The company co-owned by former Barclay’s chief Bob Diamond and African business mogul Ashish Thakkar completed the deal with the Pan African bank in August.

Mr Justin Mutasa also bade farewell to Zimbabwe Newspapers Group (Zimpapers) in September after being at the helm of the group for 12 years.

In August, Asbestos manufacturer Turnall parted ways with its former managing director Mr John Jere while RioZim also saw its former CEO Mr Ashton Ndlovu leave the mining company in October. Mr Ndlovu joined RioZim in 2012.

Not so gloomy

Diversified group Innscor Africa Limited this year became the first Zimbabwean company to hit US$1 billion revenue since dollarisation despite a challenging trading financial year. In the half year to June 2014, the group recorded US$1 billion revenue, 54 percent from the US$656 million reported for the same period in the prior year.

Innscor is the third largest company on the ZSE by market capitalisation, after Delta and Econet.

But on a year to date basis, Innscor fell 30 percent. Its total trades to date fell 27 percent compared to the same period last year.

Despite fears and assumptions, ZSE listed companies are highly undervalued, the stock market’s biggest companies – Delta and Econet have grown to be listed among the continent’s top 30 companies by market value.

The beverages maker was ranked number 19 in Africa by a Uk- based Hartland – Peel Africa Equity Research, which has a database on African listed companies dating back to 1990.

Delta then had a market capitalisation of US$1,6 billion.

On October 05, 2012, Delta became the first and only Zimbabwean firm to breach the US$1 billion mark in terms of market capitalisation since dollarisation.

Delta is ranked the fourth biggest company in Africa under industrial, manufacturing, food, beverage and tobacco category, after Nigeria Breweries, Nestle~ Nigeria, Tanzania Breweries and Kenya’s East African Breweries.

On the other hand telecoms giant, Econet was ranked 25 largest company on the continent and third largest in telecommunications.

Safaricom of Kenya is the largest with more than 19 million subscribers, 10 million more than Econet’s.

However, the rankings do not include South Africa.

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