STOCKBROKING firm FBC Securities says migration of Simbisa Brands to the Victoria Falls Stock Exchange (VFEX) will boost activity on the foreign currency-denominated bourse as historically, the firm has been a liquid counter on the Zimbabwe Stock Exchange (ZSE).
Simbisa is set to terminate its listing on the ZSE and migrate to the VFEX. This development will make Simbisa the fifth counter trading its shares on the bourse.
“Migration of Simbisa to the VFEX is likely to prove a positive development in terms of activity on the bourse as historically, Simbisa has been a liquid counter on the Zimbabwe Stock Exchange,” the securities firm said in a third quarter report.
Simbisa is on a growth trajectory and has highlighted expansion plans, after adding 27 outlets in the past year; a further 45 are to be added. The company plans to finance the expansion from internally generated funds, eliminating the risk of insufficient allocations from the official auction.
In the period under review, FBC Securities said the VFEX All Share Index advanced 24,1% quarter-to-date from 115,39 points to 143,16 points.
Market capitalisation advanced 25% to US$341,7 million quarter to date from US$273,2 million.
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The government is expected to launch the US$100 million bond on the VFEX by the end of the year to mobilise more resources for critical public infrastructural development projects across the country.
FBC Securities also noted that the country’s market sector remained largely depressed during the third quarter of this year owing to liquidity constraints following the government pronouncements anchoring inflationary pressures and exchange rate volatility.
Quarter-to-date, the ZSE All Share Index retreated 25,4% to 14 771,65 points from 19 791,94 points.
Year-to-date, the All Share Index has advanced 36,5%. The Top 10 Index also shed 25,5% quarter to date from 12 273,75 points to 9 140,55 points. Market capitalisation was also down 25,4% to ZW$1,8 trillion (about US$2,9 billion).
In the exchange-traded fund space, market capitalisation fell by 6% quarter-to-date from ZW$8,8 billion (about US$14,1 million) to $8,3 billion (about US$13,3 million). Turnover values were generally depressed, falling 41% over the quarter to $26, 6 million (US$42 492), FBC Securities noted.
“We expect prolonged liquidity challenges to drive a bearish sentiment on the market.
“We maintain the view that the bearish market presents buying opportunities in select counters that now appear undervalued, resulting in notable upside potential,” it said.
“We anticipate increased economic activity ahead of the festive season, particularly for businesses in the consumer sector. Convergence of the official and parallel market rates, coupled with improved availability of foreign currency is also a positive development for local businesses.”
Another financial research firm Equity Axis said the ZSE plunged back into the red during the week ending October 6 2022, halting a strong recovery recorded in the prior week as investors were buying in lows.
The mainstream ZSE All Share Index dipped by 8,74% to close at 13 632,14 points. Losses were stimulated by market heavies which slumped by 12,29%, outweighing the 0,11% and 2,02% gains in medium caps and penny stocks respectively.
“Performance was weighed by the sustained low liquidity in the market as the Central Bank continues pinning down on cash-in-circulation in a bid to curb inflation. Uncertainty is also reigning on the market as the country approaches presidential elections scheduled for 2023,” the firm said.
Month-to-date nominal losses stretched to 7,71%, hardly a week into the new month. Overall year-to-date nominal gains were trimmed to 25,96%, which translates to a loss position of 78% in United States dollar terms.
“Efforts by the central bank to curtail inflation by pinning down liquidity resulted in a slow-down in annual inflation from 285% to 280,4%. However, the move has also driven down demand for stocks in the interim,” Equity Axis noted.