ZSE Q1 market cap down 10 pct on weak foreign trades, liquidity crunch

ZSE Q1 market cap down 10 pct on weak foreign trades, liquidity crunch

By Bernard Mpofu, HARARE, April 7 (The Source) – The Zimbabwe Stock Exchange market capitalization for the quarter ending March 31 dipped nearly 10 percent to $4,1 billion compared to the prior comparative period on weak foreign participation and liquidity constraints on the domestic market, official statistics have shown.

The figures show that the ZSE has maintained its downward spiral since the start of the year as the industrial index slipped to 156.01 in March 2015 from 167.16 in February. Market capitalization opened the year at $4,36 billion in January.

The value of shares bought by foreign investors in March also plunged to $6,4 million from $14 million in prior year, reflecting a weak investor appetite for local stocks. On the other hand the number of shares that exchanged hands in the first quarter of 2015 also decreased compared to the same period last year.

Analysts attributed the poor performance of the equities market to structural issues confronting the economy.

“The poor performance is on the back of poor operating fundamentals in the economy as reflected by company closures, retrenchment, scaling down of operations, negative inflation and limited access to affordable long term capital,” said MMC Capital Research analyst Kudzi Samudzi.

“These challenges have in turn been reflected in poor results that have been released by most quoted companies with the exception of a few that have a foreign flair.”

Government has toned down its rhetoric on the indigenization and empowerment regulations compelling foreign firms to dispose of at least 51 percent stakes to locals in a bid to whet the appetite of investors. The new measures which would address the empowerment issues on a sector by sector basis as opposed to initial blanket approach are yet to stimulate activity on the local bourse as well as attract more foreign direct investments.