MPS interpretation causes turmoil in ZSE trades settlements

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Confusion has arisen within the local market on how to settle trades involving foreigners following the new currency framework introduced by the Reserve Bank of Zimbabwe last week on the Monetary Policy Statement.

RBZ governor John Mangudya last week introduced an interbank auction system with a managed float of 2,5 to the US dollar. This was meant to be part of efforts by the central bank to solve the foreign currency crisis in the country and to also bring to the minimum price distortions across the country.

However, the biggest elephant in the room right now for the central bank is on how to deal with the backlog of foreign currency in the absence of a significant fund to take care of the payments and to also meet current obligations. In the MPS, Mangudya said that all foreign liabilities or legacy debts due to suppliers and service providers such as the International Air Transport Association, declared foreign dividends and portfolio investments shall be treated sepMPS interpretation causes turmoil in ZSE trades settlements arately after registering such transactions with Exchange Control for the purposes of providing the bank sufficient information that will allow it to determine the roadmap for orderly expunging the legacy debt.

But the interpretation of the statement has created confusion in the market as some custodians are ringfencing foreign trades that occurred soon after the MPS, starting Friday and booking them as legacy debt.

The market is also still trying to get clarity on what currency the proceeds which occurred before the MPS will be paid in. New money that is coming in will however be converted to RTGS dollar before transactions on the ZSE. Meanwhile at the close of trades on Wednesday, the ZSE shed -1,4% as the market stretched its losing streak since the start of the week. Trading activity grew moderately from the previous session, with turnover rising from $2,3 million at the close of Tuesday to $6 million.

Foreign investor trading was again slow, with the Old Mutual stock again attracting the most attention. The foreign buys outweighed foreign purchases.

In a day with few price gains, losses in Delta and Econet which collectively account for close to 40% of total market capitalisation, the All Share Index lost 1,8%, the Industrials Index lost 1,7% and the Top 10 lost 1,8%. The losses in Bindura Mining Company dragged the Minings Index down 4,4% to close at 206,9 . Reflective of the current market sentiment, only two stocks made price gains. Masimba Holding rose by 1,176% to close at $0,086, pushing its YTD price growth 13,86%.

Dairibord rose 0,03 cents to close at $0,1568, adding $107 400,26 to its market capitalisation.

Old Mutual shed $1,35 to close at $7,50, pulling the shares YTD down to -5,4%. Bindura Nickel Corp was the next big loser at 14,37%, pulling the company’s market capitalisation down to $89,379 million.

Meikles Limited lost 13,33% to close at $0,52. The company’s application to rescind a court judgment ordering them to pay over $3,6 million owed to the Infrastructure Development Bank was recently dismissed by the High Court. Axia Corporation lost $0,03 to close at $0,40 with the shares YTD price change now at -11,1%. The electronics retailer is expected to feel the pinch as inflation erodes real income and luxury goods become less accessible to consumers.

– FinX