AVERAGE daily trades on the Zimbabwe Stock Exchange have shot up to US$2,5 million, reflecting the reduction in transaction costs.
Before this, transactions were ranging between US$350 000 and US$900 000.
Presenting the 2010 National Budget, Finance Minister Tendai Biti announced a reduction in transaction costs from 7,5 percent to 3,21 percent, that is, 1,73 percent on the buy side and 1,48 percent on the sell side.
It is against this background that bulls stormed the equities market with share prices responding positively.
However, as a result of profit taking, the market dropped slightly in the last two days of the week.
Renewed investor interest on the local bourse has also attracted foreign investors who dominated the market last year.
Foreign investor participation on the ZSE is expected to increase to above 50 percent as they continue to enjoy the multi-currency system and reduced transaction costs.
Last year saw an increased level of foreign investor participation soon after the introduction of US dollar trading on the local bourse.
In 2008 foreigners made up only 2 percent of the funds invested on the ZSE compared with 30 percent in 1997.
During the hyper-inflationary period prior to 2009, the stock market was mainly driven by local investors.
Latest figures from the ZSE indicate that the situation was completely reversed by the introduction of the multi-currency system in January 2009 that instantly stabilised the economy, especially with respect to inflation and exchange rates.
This was further complemented by the positive developments on the political front that saw the formation of the inclusive Government under the Global Political Agreement.
Kingdom Stock Brokers said reflecting these economic and political developments, foreign investor participation on the bourse should increase.
Figures for the second half of 2009 show that, on average, 40 percent of the funds invested on the ZSE belonged to foreigners. By year end, more than 4,5 billion shares worth US$414 million exchanged hands on the local bourse between February 19 and December 31 2009.
“The rise in participation by foreign investors on the ZSE was enhanced by the fact that local investors were constrained by lack of investment funds arising from the tight liquidity situation in the economy.
“Furthermore, the resurrection of alternative markets, such as the foreign currency and money markets, further dampened activity by local investors on the stock market,” said KSB.
Foreign investment participation could have been more had it not been for the high transaction costs that rendered the market illiquid. At 7,5 percent, the costs were too high compared to those prevailing in the region, especially South Africa at around 3,5 percent.
Going forward, the stock market still presents scope for investment opportunities for the long-term investor and opportunities to switch from expensive to cheaper stocks. Volatility in cheaper stocks should remain at elevated levels as short-term investors take advantage of the low prices.
Even though short-term trading on
penny stocks is on a momentum, investors should, however, look for companies with upside potential of more than 20 percent
and opportunities for high dividend declarations.
(herald)
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