Enacy Mapakame
FOREIGN investors on the Zimbabwe Stock Exchange remained unmoved by the Reserve Bank of Zimbabwe’s plans to establish the Zimbabwe Portfolio Investment Fund to facilitate cross-border remittances as they remained net sellers in the week ended August 9.
RBZ Governor Dr John Mangudya introduced the fund after the realisation that banks were taking long to process foreign exchange for securities-related transactions.
This was despite such transactions being given priority for foreign exchange allocations. But, despite announcement of the fund by the central bank chief in his Mid-Term Monetary Policy Statement, foreign participation on the stock market remained skewed on the sell side.
In the week to Wednesday, foreign sales amounted to US$1,2 million against paltry buys of US$336 205. Heavyweights PPC, SeedCo, Delta, Old Mutual and CFI were the most popular stocks.
Foreign investors continue to punt on big-cap counters that offer returns for investment on the back of their strong capitalisation and their bellwether status.
PPC accounted for US$900 000 worth of shares, while SeedCo and Delta were at US$621 000 and US$269 000 respectively. More than US$251 000 CFI shares also changed hands.
Market watchers say cement maker PPC is priced at a premium on the local bourse. PPC is trading at US71c on the ZSE compared to R4,05 on the Johannesburg Securities Exchange.
Also, dual-listed Old Mutual is trading at a premium price of US$3,9 against 202p on the London Stock Exchange.
Foreign investors often account for over half of the activity on the ZSE, providing both liquidity and stability on the market. The bull run, which characterised the first half, continues.
However, capital flight characterised trades as foreign sales amounting to US$58,3 million outweighed foreign purchases of US$27,8 million, resulting in a net capital outflow of US$30,5 million.
Statistics also show that foreign deal flow as a proportion of the total value traded on the ZSE fell from 56 percent in 2015 to 52 percent in 2016, a worrying sign of weakened investor sentiment.
But the RBZ believes the fund will help build investor confidence, stimulate active trading and create a vibrant market with efficient and accurate price discovery as well as show that Zimbabwe is a safe investment destination.
“The bank’s view is that a well-functioning capital market provides a strong signal for potential sources of foreign investment and for promoting the integrity and efficiency of the stock market,” said Dr Mangudya on August 2.
Last year, the RBZ reviewed the single investor limit to 15 percent from 10 percent per counter in order to stimulate activity on the bourse.
The threshold for aggregate foreign investment in a counter was also adjusted to 49 percent from 40 percent as it aligned the exchange control policy with indigenisation.
Fungible stocks are those shares that can be traded on two or more stock exchanges in different countries. Foreign investors play a significant role on the local bourse, accounting for over half of the activity on the ZSE.
They also help provide liquidity and stability on the market.