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Foreigners desert Zim stocks as ZSE records $185m in outflows

Nov 02 2017 09:21
Crecey Kuyedzwa

Harare - Foreign investors are continuing to sell off Zimbabwean stocks amid the erosion of currency values in local banks as well as struggling entities.

With only two months left in the year, outflows from the Zimbabwe Stock Exchange (ZSE) have already reached $185m, against $111m recorded for the same period last year.

Net sales however amount to $85m after taking into account inflows amounting to $99.9m.

October witnessed the biggest outflow of funds from the ZSE amounting to $82.2m. The net outflow amounted to $31.4m after foreigners also bought shares worth $50.7m during the month.

While the ZSE is currently trading at record levels with a 261% year-to-date gain to 521.85, challenges to repatriate proceeds have reduced foreign investors' appetite for local stocks. Zimbabwe has been facing acute foreign currency shortages, resulting in foreign portfolio investors on the ZSE failing to repatriate their sale proceeds and dividends.

In an effort to circumvent that problem, foreign investors have been using their sale proceeds to buy Old Mutual Plc shares, removing them from the ZSE register and selling them on the JSE and the London Stock Exchange.

This, analysts say, explains the “inflows” that have been witnessed in recent months, with close to $100m invested.

“The $100m inflow does not necessarily mean it's new money coming in, but all transactions by foreign investors are recorded as such whether the funds used to purchase are new inflows or sale proceeds from other transactions,” said one stockbroker, who requested not to be named as per ZSE rules and regulations.

As at September 26 2017, more than 1.5 million Old Mutual shares had been removed from the Zimbabwean register for sale on the JSE or LSE.

Meanwhile, the ZSE was up 24.73% in October while total turnover for the month at $168m was the highest this year.

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