THE exodus of Zimbabwe Stock Exchange (ZSE) securities to Victoria Falls Exchange (VFEX) has weighed down on the Zimdollar-indexed bourse’s performance for the month of February, experts say.
This follows the exit of blue-chip companies from the ZSE to VFEX which they say offers better prospects of accessing US dollar capital. In December last year, Simbisa Brands led the exodus and listed on VFEX.
National Foods Limited followed suit as shareholders approved its delisting on ZSE through an emergency general meeting held in the same month.
This year, Axia Corporation Limited and African Sun Limited declared their intentions of delisting on the ZSE while Innscor Africa successfully delisted on the market in the month under review.
Market analyst Tafadzwa Mtutu said the migrations have caused a hiccup on the performance of the market. “Overall performance was weighed down by Innscor and Axia’s jump to VFEX, which wilted down the total market cap,” he said.
Market analyst Hilton Chikoto said the migrations affected the performance of the market because most values exchanged on the bourse were from institutional investors and large corporations.
“These investors prefer the market’s liquid counters and, with the bulk of them shifting to the VFEX, investors have little to no option,” Chikoto said.
He said this resulted in one counter accounting for 50% of total weekly trades, while the top three by market cap accounted for more than 80% of the market.
The ZSE gained 3.43% in February mainly because of Delta Corporation, which picked up 29.3%, and Econet Wireless’ gains of 25.7%.
“These gains were driven by liquidity which originated from ZWL disbursements in the energy and construction sectors,” added Mtutu.
Meanwhile, African Sun has been a consistent climber throughout the month, currently having the most year-to-date gain of roughly 291.8%. Chikoto anticipates consistent growth in March, as there is normally an injection of liquidity in the market with the approach of the tobacco marketing season, although presently the majority of transactions are in US dollars.
“This will drive extra RTGS to flow into the equity market, potentially resulting in a market uptick,” he said. On the other hand, Mtutu projected a flat performance in March due to a dearth of liquidity injections.
“We expect a flat performance in March in the absence of additional liquidity injections and we identify possible government disbursements to farmers as triggers to the stock market’s performance,” said the analyst.
However, both analysts anticipate a dull performance on VFEX as investor sell-off in Axia and Innscor weigh down on the bourse despite adding to the total market cap of the US dollar market.
“With the heavyweights migrating to VFEX, the exchange has grown to over $1 billion in value, but none of the migrated counters have yet to meet the volume transactions seen on the ZSE,” Chikoto said. “This reduces investing options in the stock market once again,” he added.