Foreign investor appetite diminishes on the local Stock Exchange

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FOREIGN investor appetite is diminishing on the Zimbabwe Stock Exchange, with most foreign transactions being sales as foreigners desert local listed companies due to their underperformance, MMC Capital Research has said.
The stock broking and market research firm said low foreign investor sentiment is likely to persist on the local bourse.
“We have witnessed a shift of investor appetite on the ZSE since 2015 as more foreign investors are now concentrating on the sale side. Our view is that this trend will likely continue into 2017 as economic headwinds continue to mount,” said MMC Capital Research.
The MMC Capital report said foreign payments to foreign investors continue to be fraught with problems due to restrictions imposed by the central bank as it battles a liquidity crisis.
“Despite being ranked in the first category (of the central bank’s offshore payment priority list), the repatriation of equity proceeds as well as dividends remain a mammoth task. This will likely weigh down on the upside potential of the market going forward as foreign interest on local equities diminishes,” MMC Capital research noted.
MMC Capital said the trading activity on the ZSE will likely be depressed in 2017, given the economic headwinds facing the economy and foreigners are most likely to remain net sellers on the bourse.
“As a result of the liquidity crisis on the local front, foreigners’ participation will continue to be on the selling side though at a slower pace than prior years as it seems most of them have sold out by now,” MMC Capital noted.
However, MMC Capital said the local institutional investors will likely continue to be active on the buy side.
Institutional investors are long term investors, hence holding equities is desirable to them given the loss of confidence in other financial assets such as money markets owing to the unpredictable developments in the financial system.
The report also said buying will likely be centred on companies with strong fundamentals as well as with the capacity to pay dividends. Diverse revenue sources will also likely be a key input in stock screening for those investors who choose to invest in the local counters.
Foreigners were net sellers throughout 2016 up to January this year, reflecting their low appetite for local shares.Advertisement

In the period between January 2016 and January this year, foreigners sold shares worth $145,84 million and bought shares worth $61,675 million , representing a $84,165 million net outflow.
It is very worrisome to note that the $84,165 million net outflow is paid out from nostro accounts at a time when banks nostro accounts are running dry.