ZSE expects positive performance in 2024

Business Reporter

THE Zimbabwe Stock Exchange (ZSE) expects positive performance in 2024, driven by anticipated economic growth and increased product diversity on the Victoria Falls Stock Exchange (VFEX).

The ZSE provides a listing and trading platform for equity securities, debt securities, depository receipts and exchange-traded funds.

In addition to what the ZSE provides, the USD-denominated VFEX offers a number of benefits and incentives that include ability to raise capital in hard currency and lower trading fees, which may lead to improved liquidity.

As a result of the incentives, several companies listed on the ZSE moved their shares to the VFEX, as they sought to benefit from the exchange’s incentives and lower costs.

As at December 31, 2023, there were 14 listings on the VFEX.

ZSE group chief executive officer Mr Justin Bgoni said stability of the new currency will bring confidence in the economy, which will have a positive impact on the ZSE’s trading activities in the long run.

“The diversification of products on VFEX is expected to play a significant role in the exchange’s growth prospects. This increased product diversity will not only attract new investors, but also provide existing ones with more opportunities to diversify their portfolios,” he said, commenting on the 2023 financials.

Mr Bgoni said, as the ZSE draws close to the final year of its five-year strategic roadmap, its priorities remain on track as the drafting of the commodities exchange rules was finalised and now awaits gazetting as law.

In 2020, the ZSE embarked on a digital transformation journey that focused on innovation, automation and digitalisation.

“We plan to launch the Commodities Exchange during the year 2024. We are grateful for the support received from the key stakeholders on this project,” he said.

Mr Bgoni noted that the submission of the commodities framework to the Securities and Exchange Commission of Zimbabwe in December 2023 for approval marked a significant milestone in the drafting process, reflecting the culmination of dedicated efforts in crafting the legislation.

“Further, the contract for difference (CFD) regulations were approved by our regulator, and we look forward to starting offering CFDs during the first half of 2024,” he said.

He said the ZSE witnessed the approval of VCG Markets as the first foreign CFD-licensed player in Zimbabwe.

“More players are expected to apply for this licence, which will ultimately increase the number of our securities intermediaries in the market.

“The new product will significantly contribute to deepening the markets and enhancing liquidity on the VFEX,” he said.

He further said the group facilitated the establishment and subsequent launch of the Real Estate Investment Trust (REIT) Association of Zimbabwe.

One of the main objectives of the association, he said, is to raise awareness on the product. The organisation also seeks to lobby the Government and sector regulators to formulate laws and policies that will facilitate the growth of REITs and a favourable investment climate for the product in the country, he added.

According to Mr Bgoni, ZSE Direct and VFEX Direct have been instrumental in expanding access to the retail investing community, thus fostering greater financial inclusion.

“Through these platforms, individuals have opportunities to engage directly in the financial markets by such means, empowering them to participate in investment activities previously inaccessible,” he said.

On other projects, Mr Bgoni said the ZSE continued with its thrust towards digitalisation, intending to change workflows to improve manual systems.

He said in 2023, the key focus was on identifying departmental needs.

“After consolidating the user requirements, a gap analysis was carried out to compare the current state with the ideal state, highlighting the shortcomings and opportunities for improvement.

“A phased approach to the project was adopted, and following the feedback during the internal engagements, in 2024, the development teams will be actively engaged in implementing the necessary changes and enhancements tailored to meet the identified needs of the Depository and ZSE Markets departments,” he said.

In terms of financial performance for the year under review, turnover increased by 280 percent to $32,909 billion, with the major contributor being listing fees, which saw a 512 percent boost from the prior year.

“The increase in the number of listings on both exchanges, along with the increase in volume and value of trade on the VFEX, also played a role in the turnover increase.

“Additionally, there was a significant number of requests from issuers to extend their publication dates, which boosted the document review fees.” .

The profit for the year increased by 300 percent, from $1,696 billion in the previous year to $6,786 billion in the current year. The growth was achieved as a result of cost-containment measures implemented during the financial year.

“Despite a 157 percent increase in operating costs due to exchange rate volatility, the business maintained its margins at 18 percent from the previous year, all made possible by the 280 percent increase in turnover.”

On indices’ performance, the ZSE All Share Index, serving as a comprehensive gauge of the bourse’s performance, saw a remarkable 981,54 percent increase to end the year at 210,833.92 points.

Mr Bgoni said the substantial surge was primarily driven by the overall uptrend in local prices, considering that the ZSE predominantly operates in the local currency.

In real terms, he added, the returns on the ZSE were positive when compared to the official exchange rate, which depreciated by 792 percent.

Conversely, the VFEX All Share Index experienced a decline of 28,86 percent throughout 2023, ultimately closing at 70,48 percent.

Mr Bgoni said the divergent movements in the ZSE All Share Index and the VFEX All Share Index underscored the distinct dynamics and performance trends within the two respective exchanges, reflecting the complexities of the Zimbabwean financial markets in the year 2023.

The total market turnover recorded on the ZSE in 2023 was $555 billion, which is 320 percent more compared to the previous trading year.