With the exception of the dark period, where the Zimbabwe Stock Exchange was forced to halt trading for more than a month, the year 2020 will go down as one in which the equities market came to life.
It was more active and more rewarding than the previous two years. Gains in the previous two years were eroded by inflation and exchange rate depreciation. This year, gains beat inflation and were real.
The suspension that rocked the market
After rallying to a then record $228 billion market capitalisation with turnover of $3,8 billion already above of the $2 billion recorded the whole of 2019, the ZSE was ordered to halt trading. Some market players were accused of fuelling foreign currency instability through the use of dual listed Old Mutual. The counter was used to calculate the Old Mutual Implied Rate (OMIR).
The OMIR was used by illegal foreign market dealers to determine the exchange rate between the Zimbabwe dollar and the US dollar. While the official exchange rate was pegged at 25, the OMIR and the parallel market exchange rate raced to 120. This pushed inflation to a record 837 percent by June 2020.
A record high since 2010. The OMIR was thus blamed for both price and exchange rate instability. The ZSE was closed from June 26 to August 3. It was a blow to the capital markets and the reputation it had.
When it was finally opened, investors sold off shares. Market capitalisation fell from $228 billion to $158 billion in less than a month. However, it has since recovered to a record $267 billion by December 23, 2020.
Whatever happens in the last trading days before the year ends, the ZSE would have gained more than US$1,5 billion since January 2020.
By December 18, 2020, the ZSE had returned more than 92 percent year-to-date, in US terms. No other African Market has recorded such gains. Nigeria is a distant second with a 31 percent year to date gain.
Official statistics show that by end of November 2020, turnover had reached $14,6 billion. September turnover reached a high of $4,6 billion followed by November turnover of $4,1 billion. December turnover is likely to be massive as well.
Even though foreign investors offloaded their shares, the year 2020 will go down as one in which the ZSE was more active, with turnover reaching record levels. Foreign investors were net sellers of shares just above $5 billion, but they found willing local buyers as turnover reached $14,5 billion by end of November.
New product offerings
The year 2020 will also go down as one in which the ZSE went all out to introduce new products. While some are still to be introduced regulatory approvals and statutory instruments are already in place.
Finance and Economic Development Minister Mthuli Ncube, was very active in support of the ZSE.
Having been the source of the market’s setback after suspending trading back in June, Minister Mthuli was not only supportive of the ZSE but put in place incentives for the establishment of both Real Estate Investment Trust (REITs) and Exchange Traded Fund (ETFs).
Earnings from REITS will be exempt from corporate tax subject to specific criteria. The first ETF will start trading on the 4th of January 2021. ZSE also launched Zimbabwe Receivables Marketplace (“ZRM”) as a joint venture to serve SMEs in terms of working capital solutions.
Minister Mthuli also championed the ZSE’s initiative to open the VFEX.
Push for inclusivity
Both the ZSE and the regulator, for the first time in years, also pushed hard in terms of investor education. The ZSE introduced an online investor education platform, the ZSE Training Institute, which targeted retail investors and other beginners.
The mandate of the training institute is to deliver specialised training on various capital market subjects such as the ZSE listing requirements, ZSE products and services and the general process of investing on the stock exchange.
The ZSE also launched a new online trading platform, ZSE Direct. ZSE Direct aims to provide retail investors with a smart way to manage their ZSE investments and view their CSD online.
On its part, the Securities and Exchange Commission of Zimbabwe (SECZ), collaborated with the Investor Protection Fund (IPF) and the Investment Management Industry to promote unit trusts as a form of investment.
This is being done through the GroWealth Booklet, which highlights different products from the Investment Management Industry while showcasing how fund managers and their products have been performing throughout the year.
To get all Zimbabweans on board, in terms of investments, SECZ also launched an Investment 101 Handbook, a “starting point for any investor considering their first step into Zimbabwe’s capital markets”.
There was thus a deliberate effort not only to broaden market products but also to make it more inclusive by bringing in more retail investors.
Following the ZSE’s June suspension, the bourse lost three counters. Dual listed stocks Old Mutual, PPC Limited and Seed Co International remained suspended amid plans to have them list on the newly established Victoria Falls Stock Exchange (VFEX).
While Seed Co International has since listed on the new bourse, Old Mutual and PPL Limited are still hanging. Investors are in the dark on which trading platform they would be allowed to trade again.
In addition to the three, Seed Co Zimbabwe is pushing to delist and be listed as one entity with Seed Co International on the VFEX. Powerspeed has already got shareholder approval to delist from the ZSE. Then there is ZPI and Dawn which plan to list under parent companies ZHL and African Sun respectively. Not forgetting Falgold, which has already delisted.
The year 2020 might go down as one in which the ZSE lost at least five listed companies, but it will also go down as one in which corporate action was very high. Edgars is the only company that came to the market to raise capital.
The company raised $66,3 million excluding transaction fees. African Sun plans to merge with Dawn. ZHL is planning to do the same with ZPI and Fidelity Life.
Padenga ventured into gold mining after buying 50,1 percent equity shareholding in Dallaglio.
Dallaglio Investments (Private) limited owns Pickstone Peerless Mine near Chegutu, Eureka Mine near Guruve, and Giant Mine, a future gold mining project. Zimplow bought some assets including Scanlink which is focused on distributing large vehicles, long-range buses, coaches and generators.
ZB Financial Holdings got a new major shareholder after NSSA offloaded a 37 percent stake.
Old Mutual also sold a significant stake in RioZim. Bindura saw a 74 percent shareholding change hands. Others like Dairibord and Medtech are trading under cautionary statements as they plan mergers and acquisitions.
The ZSE has never been this active in years.
Pending Corporate deals
A significant number of companies are also trading under cautionary statements signifying potential material corporate transactions.
These are First Mutual Holdings Limited, African Sun Limited, Dawn Properties, Dairibord, Powerspeed, Unifreight, Seed Co, Medtech Holdings, Star Africa Corporation, Art Corporation and Nampak Zimbabwe.
This is what the stock market is all about.