‘Diversified capital markets key to national development’

Bart Mswaka

HARARE- Diversified capital markets can be key to national development as they allow both businesses and Government to raise capital for projects, Mr Bart Mswaka, an expert in the field, has said.

He said capital markets, the world over, are recognised as being important in funding businesses, infrastructure projects and general economic growth.

Mr Mswaka said developments at the Zimbabwe Stock Exchange (ZSE) in particular, were responding to market needs, with new products introduced to widen the market and enhance investor participation.

Among the key milestones are the launch of the Victoria Falls Stock Exchange (VFEX), which allows companies to trade in foreign currency, a development that boosts investor confidence, help companies enhance their foreign profile, cushion them from exchange risk and easily raise capital for expansion projects.

Other developments by the ZSE include the introduction of exchange-traded funds (ETFs); and real estate investment trusts (REITs), whose first listing is expected this month.

It also introduced mobile trading applications, the ZSE Direct and VFEX Direct, bringing trading convenience to retail investors as well as increase their participation.

“Capital markets have a significant role to play in national development and I believe the markets are ready to do so. And what we are also seeing today is the regulator trying to create a level playfield as stock markets play a role in raising funds for businesses,” said Mr Mswaka.

He was speaking at the recently held Business Weekly and Financial Markets Indaba 2022 Capital Markets Awards.

“The stock exchange is diversified. Those who were involved in the traditional exchange know that we wanted to change the name to Zimbabwe Securities Exchange so that we have a diversified product mix.

“As we speak tonight, we have ETFs, and very soon, in the next few days, we will see the listing of the first REIT.

“These products are responding to the needs of the clients. We are talking of Government raising a bond at the exchange, mining companies raising capital on the exchange and now we have seen the use of ICT on the exchange to enhance trading,” he said

He further said companies like Econet had seen the benefits of listing on the ZSE, growing to be the second biggest company on the bourse by market capitalisation, after Delta.

Throughout the world, capital markets provide equity capital, debt capital and infrastructure development capital that have strong socio-economic benefits through the development of essential utilities such as roads, water and sewer systems, housing, energy, telecommunications and public transport.

In 2019, Kenya successfully raised US$2,1 billion through Eurobonds listed on the London Stock Exchange, while in 2018, the city of Johannesburg successfully listed a R1,46 billion (about US$100 million) green bond on the Johannesburg Stock Exchange.

The bond was used to fund climate change mitigation strategies.

Meanwhile, Mr Mswaka said the current rout on the ZSE experienced post-May presented a buying opportunity for investors. He said it was wise to buy shares at a time there was a bloodbath.

“We are still being told we have to buy shares and the time to buy shares is when there is blood on the streets.

“The advice is true. When everyone is selling, it’s a great time to buy. This is reasonable advice yet very few people follow it.

“Be greedy when others are fearful, it’s time to be greedy.

“I, therefore, believe the market will correct and the current challenges will come to pass. The ZSE, in my view, will recover,” he said.

In May this year, the Government introduced a raft of measures to arrest the runaway inflation and speculative tendencies harming the economy.

A combination of restricted lending and higher interest rates compelled investors to unwind positions and unlock funds from the stock market.

The result has been a significant sell-off on the market, resulting in an undervaluation of counters, with the traditional blue chip firms like Delta, Econet, Innscor and Hippo valued at less than a US$1.

Prior to the announcements by the Government, stocks rallied 162 percent between January and April before they took a dip following the policy interventions.

In May alone, the ZSE fell 19 percent and recorded monthly declines of 14 percent, 16 percent and 17 percent in June, July and August, respectively.

In US dollar terms, the total market capitalisation is around US$1,8 billion, down from a peak of about US$10 billion.

During the four months to August, portfolios halved, although September experienced some 8 percent recovery, while in October, the ZSE All Share Index rose 2 percent. – Sunday Mail