Zimbabwe: Zim Bourse Closure Suicidal

Zimbabwe will remain a high-risk investment destination following the suspension of trading on the Zimbabwe Stock Exchange (ZSE), with officials at the local bourse hoping the decision is swiftly reversed to limit the damage on the country’s image.

The ZSE this week suspended trade as ordered by the government.The government accused the ZSE of harbouring ill will by tolerating problematic economic sentiment as epitomised by the Old Mutual Implied Rate (OMIR).

President Emmerson Mnangagwa’s government has anchored its investment promotion drive on the mantra “Zimbabwe is open for business”, but analysts say the suspension of the stock market militates against the attraction of investment.

Analysts say investors play a crucial role in economic development and deserve respect from the authorities.

Batanai Matsika, a research partner at investment banking firm Morgan & Co, this week said suspending trading activities on the ZSE as well as restricting transactions on mobile money platforms does not solve the fundamental issues that have precipitated the spectacular fall of the Zimbabwean dollar.

He said there is a need to go back to basics, including crafting a monetary system that not only functions but is also hinged on the confidence of all economy players.

“Further, the suspension of trading on ZSE works against any efforts to attract portfolio and foreign direct investment flows into Zimbabwe, including the launch of the Victoria Falls Stock Exchange. All in all, given the fact that risk remains elevated and that the local currency is unstable, we remain bullish on managed exporters and companies with regional exposure such as Simbisa Brands, Padenga Holdings, Seed Co International Limited,” he said.

Matsika said the Implied Old Mutual Rate is not a formal measure and cannot be the basis for the suspension of trade on the stock market.

“Neither the ZSE nor Old Mutual calculates nor publishes the OMIR. Suspension of trading falls under regulatory risk and investors consider this when making investment decisions. We hope the suspension will be short-lived so as not to affect the ZSE’s risk profile for investors,” he said.

Investment analyst Enock Rukarwa told Zimbabwe Independent this week that it was unfortunate that the country’s fiscal and monetary authorities sometimes resort to self-defeating measures.

“Without hard data tabled warranting total closure of ZSE, fundamental reasoning might have been completely misplaced at an elephantine scale. An economic approach in addressing the perceived tumult could have been prudent, especially in the grand scheme of things where foreign investment is a key enabler to our economic tumult. Currently, there is ample evidence of disgruntlement across the financial market value chain notwithstanding viability challenges affecting business operations and Covid-19-induced strain,” he said.

While the ZSE says it has engaged its regulator and proposed some solutions, the bourse remains hopeful that the suspension will be short-lived, to limit the damage on the country.

Commenting on the suspension of trading and the so-called existence of fake counters on the bourse, ZSE chief executive Justin Bgoni yesterday told Zimbabwe Independent that neither the ZSE nor Old Mutual calculates nor publishes the OMIR.

“After engaging our regulators, we were notified of the matters concerning the government and we have proposed some solutions. For now, we hope the suspension is going to be short-lived and, as such, will not have a big dent on the market and economy.

“The ZSE list of securities has always been available on the website. The OMIR relates to a comparison of the Old Mutual share price on the ZSE to that of the Old Mutual share price on the JSE (Johannesburg Stock Exchange)”

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