THE asset management sector's exposure to the stock market surged by 9,25 percentage points to 51,83% in the first quarter of this year, primarily driven by significant upward revaluations of equities fuelled by rising inflationary pressures.
In the previous quarter, the industry’s exposure stood at 42,58%.
However, the sector’s exposure to property decreased to 36,58% from 45,81% recorded in December 2023, according to the Securities and Exchange Commission of Zimbabwe (SecZim)’s first quarter report.
The report shows that total funds under management (FUM) in the period under review stood at ZW$57,77 trillion (US$2,6 billion), representing a 242,17% increase from the previous quarter.
The total figure included the United States dollar-denominated FUM of US$830,28 million, which was translated to Zimbabwe dollar at the interbank rate as at March 31, 2024.
The industry average FUM for the period stood at ZW$2,51 trillion (US$113,8 million).
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Money market investments increased from 3,27% recorded in December 2023, to 4,81% recorded in March 2024.
Investment in unquoted equities declined from 4,15% to 3,36%, while cash or call deposits, bonds, and other investments accounted for the remaining 4,49% investment exposures for the asset management industry.
Commenting on the sector performance, Morgan & Co senior analyst Tafara Mtutu said the industry performance was distorted by inflation.
“So, in December, there is not much activity that happens in the stock market and there is actually a lot of divestment that happens on the stock market, which is also compounded by the last QPDs (quarterly payment dates) of the year, which is the biggest tax payment compared to the other three QPDs. So all those, they pull the stock market lower,” he said.
“And then when you get into the first quarter, investors and asset managers are back in the game, and then they push prices and activity upwards. This is also exacerbated by increased activity in the stock market, driven by exchange rate depreciation.
“So, at the beginning of the year, the black market rate moved from somewhere around ZW$10 000 to I think close to ZW$30 000. So, all that pushed the stock market higher.”
When that is added to the other funds under management, Mtutu said there is some distortion that comes in as a result of differences in the frequency of valuation of assets.
“So you find that the equities side is valued on a daily basis because stock prices move on a daily basis. But things like unlisted equities, real estate, usually are not valued on a quarterly basis, typically six months or annual basis,” he said.
“So you have static prices in USD (United States dollar) for things like unlisted investments and real estate, which then makes it look as if there has been increased investment in equities because they have moved, whereas the other prices are quite static.
“So those distortions, I think if there was an agreed USD price that SecZim could come up with, that could really give us a really good idea on whether the funds under management have actually increased or not.”
In the absence of that data, the analyst said it becomes very difficult to say there has been a positive development in space.
“What we have noticed from our clients' side of things is that some of them are opting to go into alternatives instead of the traditional equities, because they don't want the volatility that comes with equities,” Mtutu noted.
“Even though they hold investment on the Zimbabwe Stock Exchange (ZSE), for example, companies like Delta declare dividends in USD and when they receive a dividend in USD they will rather invest it in alternatives or in the money markets before they put it back into the stock market either by converting to Zimbabwe Gold currency and then adding onto ZSE or just investing directly on the Victoria Falls Stock Exchange.
“So, all those things you really don't see coming out in those figures especially when you look at contributions because the inflation effect and the revaluation gains just distort everything.”
The report showed that collective investment schemes (CIS) funds under management increased by 219,70% to ZW$1,42 trillion (US$64,4 million).
The increase was attributed to an increase in the prices of securities held for investments given CIS exposure to equities.
The total FUM for seven CIS funds, which were denominated in USD amounted to US$37,36 million, which was a 43,42% increase from the previous quarter.