ZSE fast losing its attractiveness | The Herald

via ZSE fast losing its attractiveness | The Herald January 20, 2014 by Makanaka Nyamutowera

THE year 2013 witnessed a worrying trend where several companies were delisted from the Zimbabwe Stock Exchange either through voluntary or forced delisting. There are now a total of 68 listed firms, down from a peak of about 83. Some of the companies that were delisted include Lifestyle Holdings, Steelnet, Gulliver, Apex, Trust, Interfresh and Cairns.

The trio of Redstar, TZI and Barbican completed the list and for these three, it was long overdue as they had not been operating for a long time.

Lifestyle Holdings opted to list on a foreign bourse whilst the others were either forced or volunteered to delist owing to operational challenges.

Although there remains a total of 68 listed firms, four companies — Celsys, Interfin, Chemco and Phoenix — remain suspended.
Phoenix applied for voluntary judicial management as its war with creditors escalated.

These four counters might as well be delisted if the issues that led to their suspension are not resolved timeously.
In the New Year, it seems the downward trend is likely to continue. So far we have witnessed the suspension from trading of PGIZ to allow for the conclusion of negotiations between the company and its lenders and creditors.

Companies like CFI, starafrica, Willdale and Zeco have continued to record losses since dollarisation. The turnaround strategies of these companies have not been very convincing. CFI recapitalisation plans have dragged on due to disagreements amongst shareholders and this has negatively affected the company.

As the environment gets ever tougher — more companies — both listed and unlisted, are likely to bite the dust.
As it stands, the ZSE is fast losing its attractiveness with only a handful of companies worth looking at for a serious investor. Who knows how many companies could be left listed by the end of year?

The reduction in number of listed companies indicates declining economic performance. If the economy improves or even if it is going to improve in the short-term, companies would opt to remain listed and new ones will be attracted to the local bourse.
So far it has been the opposite. If this trend persists we will hardly have stock exchange worth talking about.

Turnover trends are also worrying, indicating concentration into only a handful of counters, mostly the top five by market capitalisation.
The ZSE performed exceptionally well in 2013, posting a huge return of 32 percent, whilst turnover jumped by a massive 57 percent to US$485 million.

Foreign investors providing 61 percent of turnover accounted for the bulk of the trades.
The top five counters by market capitalisation made up 73 percent of all trades on the exchange, leaving the rest to share the balance.
Foreign investors are mostly interested in performing companies with a liquid share register. Most of the stocks on the exchange are just too small and illiquid to attract the attention of foreign investors. Also it defies logic that the top performing counter, GB Holdings, which jumped 700 percent only had trades worth just US$7 000 for the whole year.

The same trend has continued into the New Year. With activity having started on a low note, momentum is slowly picking up with turnover levels improving. Up to January 13, the Industrials Index had gained a slight 1 percent whilst the Minings Index was down 8 percent.