By Staff Writer
The month-long suspension of the Zimbabwe Stock Exchange could dampen investor confidence on the soon to be launched bourse for foreign exchange, analysts have said.
The government on Tuesday gazetted Exchange Control regulations for securities listed on the Victoria Falls Exchange (VFEX). This comes after authorities suspended three counters Old Mutual, PPC and SeedCo from trading on the ZSE.
Lloyd Mlotshwa, executive director at IH Securities said confidence-building measures are key to ensuring the success of the new exchange.
“The VFEX is a good initiative, it is good that the SI is now in place which means work can progress swiftly from this point. I believe that there are companies that already see the attraction of being able to raise hard currency for capital expenditure, I think local institutions with time will also appreciate the opportunity to invest in hard currency assets in our hyper-inflationary environment,” Mlotshwa said.
“What is sad is that this comes against the backdrop of the recent stock market suspension which at this point still appears to have been unconstitutional which will make it difficult to motivate confidence in the VFEX at least in the short term.”
The Association of Investment Managers said the new bourse could deepen the country’s capital markets.
“We are excited about the VFEX as it presents the opportunity for the listing of previously excluded exporters particularly in the mining and tourism sectors. Local investors will now be able to participate in the USD earnings and dividends of the economy using their free funds. Similarly foreigners now have more choice of assets and currencies to trade in Zimbabwean markets. We are in support of the VFEX being a potential solution to the conundrum on Old Mutual Limited, PPC and SeedCo international,” the association said.
Last month the ruling Zanu PF party proposed the delisting of Old Mutual from the bourse and allow the counter to trade on a foreign currency exchange.
Zanu PF acting spokesperson Patrick Chinamasa said fungibility has created an opportunity for the determination of foreign exchange rate in Zimbabwe to be determined from activities emanating from actions of speculators operating on the stock exchange.
Finance Minister Mthuli Ncube last Tuesday announced the resumption of trading on ZSE. He said further investigations into market conduct behaviour by some identified market participants (brokers, asset managers and share market investors) are being conducted by regulatory and security agencies.
The investigations according to Ncube revealed that there was a strong link between the price behaviour and transaction patterns of dual-listed shares and the behaviour of the parallel market. Get all COVID-19 statistics for Zimbabwe from COVID-TRACKER