Foreign investors are cutting their exposure to the Zimbabwe Stock Exchange’s most capitalised company Delta Corporation at the fastest rate in years, as the foreign currency auction system, has given them a window to repatriate funds, long trapped in the country, Business Weekly can reveal.
This month alone, up to August 18, foreign investors unloaded a net $43 million worth of Delta shares after selling $109 million and buying $66 million worth of shares.
Overall, foreign investors sold $209 million worth of shares on the ZSE and bought just $68 million worth of shares.
This is a net $141 million sell-off.
Heavy sales were recorded in Meikles and Innscor, where $69 million and $18 million worth of shares were offloaded respectively.
A stockbroker with a leading securities dealing firm, said the auction had given foreign investors a window to repatriate earnings.
“In the past, they were constrained by having to buy Old Mutual shares at the right price and then sell the shares on the JSE. Now they are just selling and bidding at the auction.”
ZSE chief executive, Justin Bgoni, said the Victoria Falls Stock Exchange will, however, make it easier for the investors to repatriate their earnings.
“We want to attract strong companies that generate mainly hard currency to list and make it easier for foreign investors to come in and go out,” Bgoni said by text message.
The suspension of trading on the ZSE for more than a month seems to have spooked investors who had turned to the local stock market as a haven.
A stockbroker who requested not to be named for professional reasons, said the suspension of the market from trading, and the investigations on dual-listed stocks had also put a dent on the attractiveness of the local bourse.
“The so-called investigations of impropriety on Old Mutual trades remain a worry because no report has been presented and foreigners were major players who could be feeling victimised from carrying legitimate trades,” he said.
Equities market analyst, Ranga Makwata, weighed in and said; “Investors are simply bailing out because of rising uncertainty in the economy”.
“Market suspension and the continued suspension of dual-listed stocks worsened investor worries, so many are completely pulling out of Zimbabwe, cutting their losses.”
Market watchers point to the liquidity squeeze for the local Zimbabwe dollars as a reason why investors have largely sold their stock positions in the last couple of weeks.
“Liquidity of course is another reason. The market is dry. Local institutions that have been buying the most in 2020 simply don’t have liquidity but this could be short-lived,” said Makwata.
Market watchers, however, say the current sell-off, has created an attractive entry point for those who were left out of the previous rally, which saw the market reaching record levels in terms of both funds invested and the overall market capitalisation.
Delta is trading at a market capitalisation equivalent to US$247 million, much lower than its peak valuation of US$1,7 billion in 2013.
The country’s economic failings have contributed to this as Delta has endured several years of failing to adequately supply the market at some point, and also failing to push sales at another point.
In its latest trading update for the first quarter ended June 30, 2020, Delta reported an 18 percent drop in lager beer volumes and a 51 drop for sorghum beer volume. Soft drinks sales volumes were however positive up 35 percent.-ebusiensssweekly.co.zw