5 February 2018

Zimbabwe: Foreign Buyers Making a Comeback On the Zimbabwe Stock Exchange

Foreign buyers are making a comeback on the Zimbabwe Stock Exchange (ZSE), buying shares worth $30 million over the past two months after nearly two years of selloffs, as investor confidence returns on the local bourse.

Between December 2017 and January this year, foreign buys amounting to $29,5 million were recorded on the local bourse, compared to sales worth $12,9 million, resulting in net cash inflows amounting to $16,7 million.

Foreign investors started offloading their holdings in 2015, with the sell-off more pronounced upon the introduction of the surrogate bond note currency in November 2016.

But, the change of government which ushered in Emmerson Mnangagwa as president after longtime ruler Robert Mugabe was forced to cede power by the military in a de facto coup in November has ushered some degree of confidence.

"Yes its true that foreigners moved from a net selling position to net buyers after the inauguration of president Mnangagwa, which partly speaks to some degree of confidence from foreign investors in the new dispensation. However, trades are mainly concentrated on companies like Old Mutual and PPC because of their fungibility status and in Delta because foreigners perceived that the company is seen as being well poised for growth," said an analyst with a leading brokerage.

Foreign sales on the ZSE amounted to $251,9 million and outpaced foreign purchases by $105,9 million in the period January to November 2017.

Participation on the local bourse by foreigners has however, remained generally lower compared to the same period in the previous year, registering 34,46 percent and 12,24 percent of the trades in January 2018 and December last year respectively, down from the 40,49 percent and 26,46 percent achieved in the prior periods.

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.

President Mnangagwa who has since assuming office continuously assured foreign investors that they will be guaranteed repatriation of their funds, including dividends and proceeds from disposal of shares on the local bourses.

Last year, the Reserve Bank of Zimbabwe (RBZ) set up a $5 million fund to facilitate the collection and repatriation of foreign funds related to portfolio equity purchases and sales, with the scope of the fund to include the repatriation of dividends at a later date.

As at June last year, the southern African country had a backlog of $75 million in dividends and proceeds from sales that are owed to foreign investors.

Analysts say while the new political dispensation has instilled some degree of confidence for foreign investors, volumes are still very low and most foreign buyers have developed a wait and see attitude, possibly until after elections which will be held 'by July' this year, according to President Mnangagwa.

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