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Nelson Gahadza
Imara Asset Management (Imara) says the available pool of quality liquid assets on the Zimbabwe Stock Exchange (ZSE) has diminished due to the migration of several blue chips to the Victoria Falls Stock Exchange (VFEX).
In its fourth quarter Zimbabwe Strategy notes, Imara said in addition, the weight of some of the illiquid and small-cap counters in the ZiG sub-accounts for its clients had inadvertently increased.
“It is an area we will continue to keep a close eye on in order not to decrease liquidity and increase concentration risks for our clients,” reads part of the report.
Some of the counters that migrated from ZSE to the US dollar-denominated VFEX include Innscor Africa, National Foods, Axia Corporation, Padenga Holdings, and Bindura Nickel Corporation. However, Imara said a global view of all the assets needs to be pursued to better understand overall fund exposures to various assets.
“In addition, tiny volumes exchange hands, making it difficult to fully incorporate these into our models. As part of our risk management plan and fiduciary responsibility to our clients, we would want to speedily meet any cash calls without massive price declines, and hence stock liquidity is also a key consideration.
“Resultantly, these stocks generally do not make up the investment universe of our relatively shorter-term focused corporate clients seeking immediate value preservation and with potentially higher liquidity needs,” Imara said.
Mr Shelton Sibanda, chief investment officer at Imara Asset Management, said in a recent interview that the re-listing of suspended Old Mutual on the ZSE would create another liquid investment alternative in a blue-chip business with an extensive track record in this country.
“Old Mutual was one of the most actively traded stocks, generating a sizable portion of revenue for the stockbroking community and also trading income for investors.
“Post the migration of a number of counters to VFEX, trades have been mostly concentrated on a few quality and liquid counters.
The (re)listing of OM will add another quality counter and broaden investor options on the ZSE,” he said.
More importantly, he said this would help unlock a lot of “dead capital” tied up in the stock that investors could not access and/or redeploy into other avenues.
“The damage done by the OM suspension is huge, both financially and in terms of investor confidence in the country. Its re-listing will also help as a signal effect that there is still some value in maintaining a local listing,” said Mr Sibanda.
Imara said for more mature pension funds, it usually holds less exposure to equities and more towards fixed-income assets.
“At the moment, the preferred money market assets are those strictly USD denominated only. The equity exposure stresses more liquid dividend-paying companies, and the returns from these portfolios are normally lower over the longer term than the younger pension funds, as the intention is to preserve rather than grow the capital at stake,” reads the report.
Imara noted that while no longer extremely cheap, the ZSE still provided avenues for quick ZiG deployment with a proven hedging ability plus access to US dollar businesses that can be acquired in local currency.
For the VFEX, Imara said depressed valuations look to be the ‘new normal’ in the absence of foreign investors and a competing fixed income arena. Imara does not foresee any short-term impetus to drive the prices, solid fundamentals notwithstanding.
Online Reporter