Foreign buyers are making a comeback on the Zimbabwe Stock Exchange (ZSE) in December, with particular interest in Old Mutual plc shares and take positions as the group breaks its vast financial empire into four strategic units.
After mainly offloading their holdings since the introduction of surrogate currency bond notes in November last year, foreign buys stood at $11.6 million as at December 21, compared to sales worth $6.12 million, resulting in net cash inflows amounting $5.5 million.
Old Mutual plans to break the group into four independent businesses namely Old Mutual Emerging markets (OMEM), NedBank Group, Old Mutual Wealth (OMW) and Old Mutual Asset Management as part of a strategy to unlock and create significant long-term value as well as removing the significant costs arising from the current structure.
“If you take a closer look at the foreign trades, you will realise that Old Mutual has got a huge chunk of foreign buys, which is probably the main reason why we are seeing a net buying position on the local bourse,” an equity analyst said.
Foreigners expect to reap significant profit upon completion of the transactions involved in separating the group’s units.
“For foreigners what it simply means is that if you buy Old Mutual shares today, you are likely to get more shares in the future when the operations get separated upon completion of the break up,” said an asset manager.
Old Mutual Asset Management is already independent from Old Mutual plc. During H1 2017 Old Mutual plc sold and contracted to sell approximately 45 percent of the business for net proceeds of $785 million, which reduced Old Mutual plc’s stake to 5.5 percent.
The managed separation strategy also includes the sale of 26 percent stake in Kotak Mahindra Old Mutual Life insurance for net proceeds of £138 million, due to complete in H2 2017.
Additionally as part of the managed separation strategy, Old Mutual Wealth Italy was sold for £210 million.
In its half year results, Old Mutual plc said it expected the listing of OMW and Old Mutual Limited (OML), the South African holding company which will initially consist of OMEM, the Group’s Nedbank shareholding and Old Mutual plc, to take place in 2018 at the earliest opportunity after the release of the 2017 full year results.
OMW got a capital injection amounting to £200 million as an initial step in preparing its capital structures and transition of centrally held liquidity buffers.
Old Mutual traded at 454.79 cents at the ZSE on Thursday, a 51 percent premium compared to the price on its primary listing on London Stock Exchange (LSE) and Johannesburg Stock Exchange (JSE) where its trading at 299 cents and 301 cents respectively.
Foreign portfolio flows, from equity purchases by foreign investors, provide both liquidity and stability on the market which is positive for not only listed firms but the country at large.
Analysts say the expected economic turnaround premised on the new dispensation is likely to impact the stock market’s performance and improve foreign participation on the local bourse. –The Source