THE Zimbabwe Stock Exchange plunged to its lowest turnover since April 2009 in October as negative sentiment on the market continues to widen.
Latest statistics from the ZSE show that total turnover was at US$12,86 million a figure 54 percent lower than the US$28,2 million achieved last year and 28 percent lower than what was recorded in September. It is also the lowest transaction value recorded in the year to date.
The October figures are the lowest since April 2009’s US$11,62 million, a period which marked the early days of dollarisation. Since 2009 to 2014 monthly turnover has averaged above US$30 million while for 2015 the average is currently around US$20 million.
The transaction value translates to just under US$600 000 turnover a day, an amount which impacts on the viability of the stock market industry. November and December are likely to be worse as sentiment on the bourse remains weak; a mixture of poor company fundamentals (declining earnings) and the general economic environment. The continued focus on politics is not helping matters either. Based on history, reported earnings are expected to be in decline over the next three years. This will put pressure on the stock market. A fragile economy adds to the pressure on earnings. That makes the risks particularly worrisome.
Investors have develop fatigue on the market while asset managers and pension funds are opting for fixed return instruments. There are also concerns that it is expensive to trade on the ZSE as compared to other regional markets. However big market downturns like the one the ZSE is experiencing also create big opportunities for the risk taking investor.
Once upon a time, being a stockbroker was comfortable, genteel and lucrative. But now with the October trading pattern, total brokerage that accrued to brokers in that month is under US$300 000 before taking out the rebates. After rebates, the average for brokers is paltry, worse still, considering that 80 percent of the market share of stockbroking services is held by less than five firms. The bear market is particularly hitting the ‘un-parented’ stockbrokers hard. The ZSE and the Securities and Exchanges Commission also turned over a low amount (below $50 000) from their respective levies.
Foreign inflows were also at the lowest (year to date) in October at US$6,39 million and the lowest since June 2010’s US$4,8 million while there were more outflows at US$7,49 million. The Industrials Index close the month with a year to date loss of just under 20 percent. FinX