• The CSAG.ZW ETF exhibited an 80% growth over the period ending 31 December 2022
• Downward risk to persist stemming from the continued tight monetary environment
• With the expectation of a more favorable macroeconomic environment, the Fund manager is convinced that the ETF will continue on its upward growth trajectory

Harare- Zimbabwe Stok Exchange listed ETF Cass Saddle Agriculture Exchange Traded Fund has published its financial results for the period ending 31 December 2022. The fund which has exposure primarily in the agriculture sector and its associated value chain, was listed on the ZWL-denominated bourse on the 15th of July 2022 and has exhibited an 80% growth over the period ending 31 December 2022. Despite the lack of historic performance data, this strong performance is impressive given that the All-Share Index of the ZSE grew by only 21% over the comparative period. The fund received dividends from 3 counters, and the Fund Manager perceived it to be prudent to reinvest the dividends.

This performance was achieved despite the macro environment during the review period, characterized by a tight monetary policy stance adopted by monetary authorities. This was primarily evidenced by the increase in interest rates and the attendant increase in the capital gains tax on disposals of listed equities within 180 days from the date of purchase. According to the Fund Manager, Calvin Mugabe, these monetary developments adversely affected the stock market, resulting in a major pull-back that lasted from May 2022 until November 2022, when a recovery ensued.

With the monetary authority stating that they intend to maintain a tight stance, only willing to adjust marginally in line with inflation data, there is a downside risk that the future performance of the EFT will be compromised. Moreover, there have been generally low levels of liquidity in the market which, if the situation persists, will result in less borrowing and less investment expenditure within the agricultural sector. Additionally, the tenures that financial institutions are implementing are not supportive of long-term borrowings and may also pose a risk to future growth.

Despite the downward risk, the ETF manager has expressed that there lies potential in the agriculture sector of the economy and resultantly the downstream benefits to the agriculture-listed stocks on the ZSE. In his view, the NDS1 is very deliberate about transforming the economy into an upper middle-income society and he believes that agriculture will play a pivotal role. This will be a key driver of the future growth of the Fund. Given the lack of historic data, it is not clear if the management of the Fund will be able to leverage any external opportunities. However, the manager believes that The Cass Saddle Agriculture Exchange Traded Fund will benefit from factors such as geopolitical tensions and the associated global food crisis. With the expectation of a more favorable macroeconomic environment, the Fund manager is convinced that the ETF will continue on its upward growth trajectory.

-Equity Axis News