2021 eventful year for capital markets

HARARE – The year 2021 was quite eventful for Zimbabwe’s capital markets with the primary bourse, the Zimbabwe Stock Exchange (ZSE), reaching all-time highs. Some of the developments have helped increase capital markets products, boost efficiency as well as enhance retail participation on the capital markets, traditionally viewed as elitist.

By Enacy Mapakame

For instance, an agriculture commodities exchange — the Zimbabwe Mercantile Exchange (ZMX) officially opened its doors during the year for smooth trading of agriculture commodities in the country allowing smallholder farmers to realise price discovery.

On the primary bourse, the ZSE maintained a bull run until October, with market capitalisation breaching the $1 trillion mark in September, for the first time since the market rebased over a decade ago.

Although small caps led the market in the first half of the year, blue chips sustained the market trajectory with strong performances as new money found itself on the bourse driving demand.
Investors diverted funds onto the market as a hedging strategy against an increasingly volatile parallel market rate.

Coupled with excess liquidity on the market, punters have for years used the equities market as a safe investment haven and hedge against volatility.

During the year, the ZSE also introduced the ZSE Central Depository and some counters have already migrated although it has generated legal action from investors who feel the move will shortchange them.
Worth noting is the developments on the US dollar denominated exchange, the Victoria Falls Stock Exchange (VFEX), which started off with one counter, Seed Co international last year.

But in 2021, the market saw a new listing in the form of resources group Caledonia, while Padenga later migrated from the ZSE. Nickel producer, Bindura stopped trading on the ZSE in December for a subsequent listing on the VFEX. More companies are expected to make their way on the VFEX, for instance CBZ has indicated interest in listing.

The promise of new company listings as well as exposure to different asset classes, has done much to generate investor interest in the VFEX, which officially opened its doors in October last year.

Among other key developments during the year were a Memorandum of Understanding (MoU) between the ZSE, the VFEX, and the Tobacco Industry and Marketing Board (TIMB) and initial indications are that spin-offs from the deal will help farmers and merchants raise capital, which has also helped generate investor interest.

While capital markets may not be ideal for everyone, experts say they still present vital investment opportunities for punters in the long term with top picks being consumer oriented stocks and blue chips on the back of their strong capital base.

The VFEX also provides a strong case for investment with its rich incentives in place.
The Government introduced several incentives to lure investors and listings, for instance, capital raised by a listed company on the exchange may be held in an approved local or offshore account with an internationally recognised banking institution, tax incentives for shareholders of shares listed — at 5 percent dividend withholding tax (foreign investors only) and exemption from capital gains withholding tax while exporters retain 100 percent of their incremental export proceeds.

Source: Sunday Mail