Liquidity constraints is a potential threat to companies dumping the Zimbabwe Stock Exchange (ZSE) for the Victoria Falls Stock Exchange (VFEX) amid low trade volumes at the dollar-denominated bourse, Imara Capital Zimbabwe chief investment officer, Shelton Sibanda, has warned.
He told Business Times that companies should not just follow the ever-growing list of companies leaving the ZSE for VFEX.
“Caution has to be taken before a company decides to migrate to the VFEX as liquidity constraints could potentially remain a concern and may result in challenges around valuation, portfolio rebalancing, and restructuring,” Sibanda warned.
He gave an example of Padenga Holdings, which was one of the first companies to migrate to VFEX, which has experienced a serious plunge in its trade volumes.
“Post-migration value traded and volumes have dropped significantly to around US$200 000 as compared to the volumes of around US$900 000 when it was on ZSE,” Sibanda said.
A subsidiary of ZSE, VFEX was launched in 2020.
Several companies have since delisted from the ZSE and migrated to VFEX. Apart from Padenga, other companies that have migrated to VFEX include Bindura Nickel Corporation, National Foods Limited and Simbisa Brands.
Conglomerate, Innscor Africa Holdings, Axia Corporation, African Sun Limited and Seed Co Zimbabwe have since announced plans to migrate to VFEX.
Other companies listed on VFEX are Caledonia Mining Corporation, Seed Co International, Karo and NedBank.
More companies are expected to join the bandwagon to migrate to VFEX this year.
However, liquidity issues remain a concern.
“We speculate a few other companies will also be migrating to the dollar-denominated bourse during the year,” Sibanda said.
He added: (However) rebuilding trust will take time and we should not expect much in the way of foreign investment for a while and the trend does not bode well for VFEX and foreign portfolio investment in general.”
Sibanda said this would leave ZSE relevant.