23 November 2012

Zambia: LUSE in Poor Show

THE Lusaka Stock Exchange (LuSE) has performed badly this year with 50 per cent of the total market recording negative gains from January to November 2012.

Stockbroker Zambia financial analyst, Chenge Besa, Pangaea Renaissance Securities chief executive officer Caesar Siwale and Dot Com Zambia chief executive officer Canbel Mawana said separately in Lusaka that there was need for reforms for LuSE.

Ms Besa said yesterday that LuSE had 22 listed stocks as at November 2012 and the performance shows that 11 stocks of the market had recorded negative gains from January to November 2012.

"The LuSE All Share Index is down 12 per cent in local currency terms and 20 per cent in United States (US) dollar terms Among the notable price movements are -30 per cent drop in the share price of Celtel Zambia, -12 per cent Investrust Bank, -31 Standard Chartered Bank

Zambia, -25 per cent ZAMEFA...," she said.

Ms Besa said the other useful indicator of stock market performance is the Price to Book Value ratio (PBV) and noted that a number of firms were trading at a share price which was 25 per cent below its book value.

"The general rule of thumb, all else in place and assuming good management , is that a PBV of one or less suggests that the stock is grossly undervalued - and therefore a bargain buy or investment," Ms Besa said.

LuSE's poor performance is, however, in sharp contrast with the overall splendid performance of the Zambian economy currently running at just over seven per cent Gross Domestic Product growth rate.

"It is also worth noting that the recent GRZ debut Eurobond issue was hugely successful and completely over-subscribed at US$11 billion against a take up of US$750 million. In short there is money out there looking to come into Zambia.

So why is it not using the LuSE as alternative entry conduit?"

When contacted for a comment, LuSE chief executive officer Beatrice Nkanza, admitted that the stock exchange was not performing well and attributed the scenario to the number of the listed companies.

Mrs Nkaza said the Government should encourage parastatals and other local firms to enlist to enlarge the market and show local confidence.

But Mr Siwale and Mr Mawana said it was difficult in Zambia to easily liquidate shares if you have got an emergence.

They said selling shares was one way of raising capital for the SMEs world over but that it was not the case in the country.

The two said during a discussion forum organised by Centre for Trade and Policy Development in Lusaka on Tuesday evening that big multinationals had dominated the stock market in the country.

Mr Mawana said more firms should be allowed to participate in buying shares by providing an enabling environment.

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