THE Securities and Exchange Commission of Zimbabwe (SECZ) says the Investor Protection Fund grew 19,6 percent in 2016 to US$6,4 million from US$5,5 million in the previous year driven largely by the equities portfolio, which rallied in the fourth quarter.
A stable growth of the fund is anticipated in 2017 “as long as there is semblance of stability on the Zimbabwe Stock Exchange (ZSE),” according to SECZ chief executive Tafadzwa Chinamo.
The fund’s exposure to equities is around 40 percent.
“The return on the Fund’s assets for the year ended December 31 2016 was calculated at 19,59 percent driven by the equities portfolio which rallied in the fourth quarter of 2016. The assets increased from US$5,529 984 as at 1 January 2016 to US$6,431 489 as at December 31 2016. Prior to the fourth quarter, the Fund recorded losses which date back to 2015,” he said.
Chinamo said there is a less probability of claims being lodged in the near future on the back of increased regulation of the capital markets “Given that there is increased regulation of the capital markets, we do not foresee claims being lodged with the Fund in the near future. In that regard we anticipate stable growth of the asset base in 2017 provided there is some semblance of stability on the ZSE,” he said.
Meanwhile, Chinamo said the revival of the bond market is very promising and ZSE is already considering a bond issue from a listed company for listing.
ZSE made an application to SECZlast year to revive a regulated bond market, which became dormant 15 years ago, in an attempt to diversify avenues through which entities could raise capital.
“The outlook for reviving the Bond market is very promising. As the Commission we are very supportive of the initiative. I am informed the ZSE is set to list its first financial instrument soon,” he said.
A bond market involves the issuance and trading of debt securities in the financial market where participants can issue new debt in the primary market or buy and sell debt securities in the secondary market.
Acting ZSE chief executive Martin Matanda confirmed that some progress has been made towards the revival of the bond market. “At this stage we are expecting the imminent gazetting of the debt market rules. Some progress has also been made in the area of preparation of the environment and calibration of the systems for implementation purposes”
Chinamo said like all bond markets elsewhere, success depends on the quality of the issues and the market’s ability to provide the required funds. “And in a depressed environment such as ours, bond investors will focus on the borrowers’ ability to repay and insist on measures that minimise default risk.
“Investors will welcome new tradable securities in addition to equities. However like equities I feel the liquidity may be low,” he said.
The revival of the bond market is expected to attract more capital to the market and ease the tight liquidity situation. Given the current short-term nature of bank loans and serious liquidity constraints facing the country’s productive sectors, analysts have long argued that there is need for a regulated platform for debt instruments that can avail long-term capital for the development of the economy. FinX