FINANCIAL firm, Old Mutual Zimbabwe Limited (OMZ) is delisting its Exchange Trade Fund (ETF) from the Zimbabwe Stock Exchange (ZSE) due to the increased delistings from that bourse for the Victoria Falls Stock Exchange (VFEX).
According to OMZ, the ETF, which was launched on December 1, 2020 and listed on the ZSE on January 4, 2021, was comprised of counters that constituted the ZSE Top 10 index.
The ETF was listed by way of introduction following OMZ’s injection of the initial seed capital in the form of scrip in the exact weights of the ZSE Top 10 index.
However, since the creation of the VFEX, 14 companies have delisted from the ZSE, which include key constituents of the OMZ ETF dubbed the OMZ ZSE Top-10 ETF.
This has affected its performance on the ZSE, as it was meant to track the performance of the bourse’s Top 10 Index.
“The ETF was listed by way of introduction following Old Mutual Zimbabwe Limited’s injection of the initial seed capital in form of scrip in the exact weights of the ZSE Top 10 index.
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However, since the listing, 11 counters have delisted from the ZSE, with some of the counters migrating to the VFEX,” OMZ said in a circular on the termination of listing the ETF.
“Among the counters which delisted from the ZSE were key constituents of the ETF, namely Axia, Innscor, National Foods, Padenga and Simbisa.
The delisted stocks were some of the most attractive counters on the ZSE with strong fundamentals, high dividend yields and high liquidity.
“On account of the significant changes in the composition of the ETF, the heightened tracking error as a result of challenges in replicating the index and thin trading volumes, the managers are proposing to delist the ETF and subsequently unwind the fund.”
The delisting of Axia Corporation Limited, Innscor Africa Limited, National Foods Holdings Limited, Padenga Holdings Limited and Simbisa Brands resulted in the OMZ ZSE Top 10 ETF’s value declining by nearly US$725,52 million.
“The current composition of the underlying index has made it difficult to replicate the Index and thus increasing the tracking error,” Old Mutual Investment Group Zimbabwe (Pvt) Ltd managing director Marjorie Mayida told the ETF’s unitholders.
“This, coupled with thin trading of the Old Mutual ZSE Top 10 Exchange Traded Fund on the Zimbabwe Stock Exchange, prompted the Managers to propose the termination of the listing of the Old Mutual ZSE Top 10 Exchange Traded Fund and unwinding of the fund to preserve value for the unitholders.
“Accordingly, on behalf of the managers, I recommend all holders of the Old Mutual ZSE Top 10 Exchange Traded Fund to vote in favour of the resolutions approving the termination of listing on the Zimbabwe Stock Exchange.”
Since the reintroduction of the local currency unit in June 2019, the ZSE has had periods of extreme volatility owing to the domestic tender losing value.
While the introduction of the Zimbabwe Gold in April, which replaced the Zimbabwe dollar, was meant to bring stability, the bourse continues to lose real value.
Over the past few months, the ZSE’s market capitalisation has been weakening, according to financial service firms and stockbrokers.
The OMZ ZSE Top 10 ETF was rebalanced at least four times due to exchange rate volatility.