ZSE Drops By 10% In Pres. Mnangagwa’s Second Week, Foreigners Still Net Buyers

In the first week of President Mnangagwa’s administration the Zimbabwe Stock Exchange (ZSE) registered growth as the downward trend the exchange had been on reversed.

Prior to the swearing in of the new president, the stock market had been in a free fall. Analysts assured us all that it was a market correction which actually was a good sign.

In that first week after the inauguration both the industrial and mining indices registered growth. The industrial index grew by over 17% and the mining index was up 0.18%.

In the week ending 8 December only the mining index grew as it was up 4.67%. This growth was mainly because of Bindura’s gains.

The industrial index shed 10.16% week on week. The heavyweights, British American Tobacco, Econet, Old Mutual and Delta all dropped to close the week.

Turnover dropped by almost half, from $29.7m in the previous week to $15.1m. Market capitalisation fell from $10.5b to $9.6b.

Foreigners

Foreigners were net buyers in the week, purchasing shares worth $3.4m compared to sales $1.8 million. Both the buys and sales were down from the previous week.

If you consider that total market turnover for the week was $15.1m, it means that foreigners’ purchases represent 23% of the total market turnover for the week.

We do not know just exactly what this means because all we know is that foreigners bought shares worth $3.4m. We do not know if these foreigners are residents in the country or not.

If the foreigners are not resident in Zimbabwe then we know that there is transfer of funds from their bank accounts (hard currencies) to Zimbabwean bank accounts. This would be what they call foreign portfolio investment. This is not foreign direct investment (FDI) but it’s equally good, the only difference is that FDI involves the foreigner obtaining a controlling ownership.

So let’s not get bogged down it is not FDI  because these portfolio investments actually recorded in the financial account of our country’s balance of payments.  So we have the right to feel optimistic about the activities we are witnessing on the ZSE.

Now that the Indegenisation Act which required foreign investors to give up 51% of their companies is set to be repealed we should see even FDI flow into the country, or so we hope.