Zimbabwe’s insurance sector regulator, the Insurance and Pensions Commission (IPEC), says it has noted inconsistencies in pension funds’ valuations of the companies that were suspended from the Zimbabwe Stock Exchange (ZSE).
Pension funds are typically heavily invested on the local bourse as they try to grow pensioners’ monies.
Official numbers show that as at the close of 2020, pensions funds investments accounted for 34,75 percent of the ZSE’s total market capitalisation.
But some of these invested funds are currently tied up in shares of Old Mutual Zimbabwe, PPC Zimbabwe and Seed-Co International, which were removed from the ZSE last year.
The three multiple-listed firms, were removed from the bourse after they were accused of providing proxy exchange rates (for example, the Old Mutual Implied Rate) implied by their prices on foreign bourses such as the London Stock Exchange.
The lack of resolution over Old Mutual and PPC’s shares (Seed-Co switched to the United States dollar-denominated Victoria Falls Stock Exchange in November) leaves pension funds’ investments in limbo.
But it also confuses pension fund managers on how to value their holdings in these companies.
IPEC said once the issue of the suspended firms has been settled, it might be compelled to give guidance on valuation to ensure fairness and uniformity.
“Values of investments in quoted equities have been growing at a decreasing rate since June 2020 on account of the suspension of trades on Old Mutual, Seed-Co and PPC, counters in which most insurers and pension funds are invested.
“Whilst the Seed-Co counter has resumed trading, the other two counters remain suspended,” said IPEC in its Pensions Report for the quarter to December 2020.
“The commission noted that there were inconsistences in the valuations of these suspended counters and should the counters remain suspended, guidance will be provided.”
At least for investors in Seed-Co International, the valuation is a little clearer.
During the first quarter of this year, there were US$2 686 worth of trades in Seed-Co International on the VFEX, which saw the company’s share price going up by 11.1 percent to US$0.2.
Seed-Co’s market capitalisation on the new bourse is circa US$43 million.
Meanwhile, it is likely that pension funds will continue to invest on the ZSE as it has largely outperformed inflation compared to other assets such as the money market.
In the first quarter, the ZSE gained $225.1 billion in value as investors continued to use it as a hedge against inflation.