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Multiple headwinds pull back VFEX

ZIMBABWE’s new bourse, the Victoria Falls Stock Exchange (VFEX) has been pulled back by multiple headwinds stemming out of its “politically motivated” founding process last year after Zanu PF hawks were angered by fungible counters, analysts said this week.

The hype that permeated Zimbabwe’s capital markets during the build up to the VFEX’s launch six months ago is slowly dissipating as targeted investors keep their distance.

But in Harare, VFEX chief executive officer (CEO), Justin Bgoni pleaded for patience this week, saying even its 127 year old sibling, the Zimbabwe Stock Exchange (ZSE) went through a lengthy nurturing process before conquering the African markets.

He said this after holding a crucial virtual master class this week, targeting mining companies.

It is not clear if the big mines were convinced by his pitch.

But Bgoni has his work cut out.

In the first place, investor appetite for Zimbabwe has been generally low, as fund managers have been jittery since the abrupt closure of the ZSE last year, with politicians accusing three fungible counters of manipulating the market.

Secondly, the relentless global pandemic, Covid-19 has forced investors to freeze any fresh adventures before a clear path emerges about how it will end.

Bgoni, who is also the ZSE CEO, could be feeling the heat after being struck with reality.

Zimbabwe’s forex-only second bourse was launched to bolster investor appetite for the country following a bolt of capital flight as volatilities hit the decades old ZSE, which trades in the domestic unit.

But half a year after kicking off, only seed technology outfit SeedCo International has listed.

SeedCo International traded flat at US$0,81 in February, as the ZSE scaled up its upward trajectory, with the All Share Index gaining 15,37% to close at 4 154,37 points.

The ZSE gained 57,58% in February.

The background to SeedCo’s listing is that after jittery authorities chased away the three fungible counters — financial services giant Old Mutual and cement producer PPC, ironically following a bull-run Seedco, the blue chips were asked to pursue listings on the VFEX.

SeedCo took up the offer but its peers are carefully studying the developments before making commitments.

Economic research firm Econometer Global Capital said this week that appetite for investment remained low, noting that this had limited the interest in VFEX.

“Generally, exchanges arise because of what we call a very fertile ground for investment which is contrary to the genesis of VFEX,” it said.

“It is an exchange which came by accident, by convenience, or by duress because the whole legal framework, political framework and philosophy supporting the setup of VFEX were more to do with a carrot and stick approach. So (you cannot) expect a stampede of investors. Don’t be surprised if the appetite is low causing the dryness of the exchange,” Econometer said.

Batanai Matsika, the head of research at Morgan&Co said the VFEX had been dealt a blow by the high risk perception that has continued to haunt Zimbabwe since its inception.
But he agreed with the ZSE boss that with time, the VFEX might make its way and attract investors.

“There are two sides. There are factors such as the political risk perception that are limiting performance and/or attractiveness of our capital markets in Zimbabwe and that is a known fact so we can’t run away from that,” Matsika told businessdigest.

“At the same time projects are limited because of Covid-19 as people can’t really do the campaigns as much as they used to. Locals don’t have the capacity so the foreigners are the target. Give it time, it may take off and surprise everyone actually. You can give it another year, and basically we need to get out of the Covid-19 pandemic and we see how it works, it may bring good news actually,” Matsika said.

He argued that Finsec, another capital market, went through a similar dry spell after going live.

Bgoni said attracting one counter in six month must not be viewed as a sign of slackening investor appetite.

“To bring this into context — the last Initial Public Offer on the ZSE was in 2016.

“The ZSE itself was established in 1894 and it took patience and great work to ensure that it grew to where it is today,” Bgoni said.

Speaking around the impact of the Covid-19 pandemic on trading, Bgoni said trading on the ZSE has always been done remotely since automation in 2015.

However, ZSE had to implement remote working for some of its personnel in order to decongest the offices and also minimise unnecessary movement.

“Being a service organisation, ZSE can continue having some of its staff working remotely until the Covid-19 pandemic is fully dealt with,” he said.

Bgoni said PPC Limited and Old Mutual Limited remain listed on the ZSE, albeit under trading halt.

“Discussions between the companies and the government are ongoing. The ZSE is not meant to determine the valuation of its listed securities but to ensure an orderly marketplace where investors determine the market price through buying and selling.
For reporting purposes, each stakeholder may be guided by their particular industry practices with regards to securities that are under trading halts,” Bgoni added. ZimInd

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