Foreigners reduce appetite for Zimbabwe stocks

  • Foreign buys dwindle to 27% of total value traded
  • On the net foreigners closed in net sell off position
  • Currency changes, policy shift and low forex levels deterred investments

Harare- Offshore demand for Zimbabwe quoted equities reduced drastically in 2019 in line with the country’s move to abandon the stable USD currency.

Data from the Zimbabwe Stock Exchange (ZSE) shows that foreigners accounted for only 27% of total stock purchases by value made during the 12 months period from January to December 2019.

This ratio compares less favourable to a 2018 outturn of 37% which was an increase from the 21% recorded in 2017.

The decline in 2019 came on the backdrop of policy changes by government which led to the retreating of some foreign investors.

Factors that influenced the drop include the scrapping of multicurrency which has been in effect since 2009. Return of the Zimdollar effectively deprived investors of USD denominated returns, an advantage which Zimbabwe enjoyed ahead of peers, over the decade.

The policy changes also resulted in loss of investor confidence in the local market as investors shy away from injecting money into a highly uncertain economy fearing incurring exchange and inflation losses.

Shortage and high cost of accessing foreign currency in the country also played a part in reducing foreign participation on the market.

In order for companies mainly in the manufacturing industry to operate that is in order for them to acquire materials for production foreign is needed to import the needed materials hence that lack of forex affected them resulting in low foreign participation.

The year 2019 saw foreign companies such as Pepkor exiting the Zimbabwean market after incurring losses due the harsh operating environment characterised by hyperinflation among other things.

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