Experts in the capital markets are projecting further growth in retail investor participation on the Zimbabwe Stock Exchange (ZSE) in 2022 on enhanced access to trading at a time foreign participation has been on a decline.
While foreign participation slowed in the past year, the introduction of easy-to-access platforms for trading has increased participation by retail investors, a trend that stockbrokers EFE Securities see continuing.
In 2021, foreign participation remained sluggish with disposals accounting for 19 percent of the total turnover while purchases claimed a mere 4 percent of the same as foreigners continued to shy away from the Zimbabwean stock market due to delays in movement of international payments.
However, local investors spurred activity both on the buy and sell-side as they piled stocks to hedge against economic volatility, subsequently accounting for 81 percent and 96 percent of the sell and buy-side respectively.
Platforms such as ZSE Direct and C-Trade, have allowed ease of buying and selling of shares by retail investors.
During the first half of the year 2021, the C-Trade platform also spurred trades by retail investors although the values still remained low. With more liquidity coming from the anticipated economic growth spurred by agriculture and mining, more retail investors are expected to turn to stocks as a viable investment option.
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On ZSE Direct (an online trading platform run by the ZSE) the growth in retail investor participation on the stock market has been phenomenal. The platform, which was launched in September 2021 and closed the same year with 3 149 total users, has since grown to 9 121 total users.
Active users at 939 for the four months to December 2020, closed 2021 much higher at 4 737 reflecting the growing interest from retail investors. The growth in active users was also reflected in the growth in the number of trades from 1 766 for the four months to December 2020 to 31,142 for the year to December 2021.
The total value of trades, which was at $14,3 million in the four months to December 2020, ballooned to $248,4 million in the 12 months to December 2021. The introduction of easy-to-use trading tech platforms such as ZSE Direct and C-Trade has also added to the attractiveness of equities as an asset class.
On C-Trade the total number of registrants or first-time investors shows a significant uptake comparable to the approximately 7 500 active investors accrued since dollarisation.
Such an exponential increase signals a market poised for growth as happened last year when the number of participants on C-Trade grew by 60 percent from the previous year. C-Trade has approximately 26 000 users currently.
“In the ensuing year we expect more activity in the market mainly coming from retail investors, due to availability and accessibility of trading platforms and new listings,” said EFE Securities in their FY2021 Review and 2022 Outlook. In the prior year, retail investor activity improved, therefore, bringing more liquidity in the market. Foreign outflows continued to outstrip inflows on the market, therefore depressing prices as locals failed to cope with the supply. However, with a better foreign currency allocation system we expect a turnaround in this space with more foreigners gaining confidence to buy in the local market,” said the stockbrokers.
While most counters were affected by Covid-19 due to lockdowns, it is the hospitality industry that suffered the most as travel restrictions were imposed, while clothing retailers also lost weeks of trading during the first quarter of the year. However, the blue-chip counters have continued to be the markets’ favourites as they provide a good hedge against currency depreciation.
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“The heavy cap counters that offer diversified goods like consumer staples are well-positioned for growth in the Covid-19 era, for example, National Foods is poised for growth as it offers commodities with inelastic demand.
“Econet continues to grow as most personnel have adapted to work from their home and schools also now offer lessons online,” said EFE Securities.
According to the stockbrokers, the market’s momentum stocks Meikles, Delta, Econet, CBZ and Innscor proved their mettle as they emerged the most liquid stocks on the bourse accounting for a combined 55 percent of the annual market spend.
Meikles, Delta, and Econet were the standout performers for the year with respective contributions of 20 percent, 12 percent and 9 percent as investors continued to cherry-pick in the heavies. starafrica, Dawn, and RTG drove the market’s volumes performance with a contribution to total volumes of 37 percent, 29 percent, and 8 percent in that order on the back of corporate transactions that saw major shareholding structural changes in the three companies. Overall, market cap closed the year at $1,32 trillion with telecoms giant Econet being the biggest counter by total value accounting for 17 percent of total market value by the close of 2021.
Fifty-one counters closed the year in the positive, led by logistics group Unifreight which surged 16 011 percent to close at $29,96. CBZ was the only counter to close the year in the negative with an 11 percent decline to $75,16. The banking group once reached a high of $123,61 during the year.