Foreign investors will continue domination on the Zimbabwe Stock Exchange (ZSE) unless there is fresh tailwind on the local space, a leading brokerage firm has said.
Foreign investors account for over 70% of the trades on the ZSE. Four years ago, foreign participation level was under 20% as locals dominated the stock exchange.
However, the prevailing liquidity crunch has given foreign investors room to dominate trade.
MMC Capital said in a research note to investors that considering the ever increasing economic headwinds in Zimbabwe, foreigners continue to be key players on the local bourse.
“Foreign participation levels are currently over 76% with locals, only chipping in 24%. Our view is that, as long as there are no fresh tailwinds in sight on the local space, local investor participation will remain low,” MMC Capital said.
It said the tightening economic environment has seen the Zimbabwe ZSE engaging into a bearish mode, “particularly in the last 18 months, with dwindling company profits pulling the market southwards”.
Listings on the ZSE recorded a peak of 79 counters in 2008 and the bourse has seen a consistent fall to the current 58, driven mostly by the austere economic climate that has precipitated closures and delistings, MMC said.
“Market concentration has inevitably become part of the DNA of the local market, with 10 counters accounting for 78% of the total market capitalisation,” it said.
Meanwhile, the benchmark industrial ended the week lower on Friday at 130,83 points after losing 0,29 points due to losses in heavyweight counters Delta, Old Mutual and Innscor.
Delta dropped $0,0025 to $0,82, Innscor retreated $0,0046 to trade at $0,6045. Old Mutual shed $0,0475 to $2,20.