The Zimbabwe Stock Exchange (ZSE) is finalising the procurement of a market surveillance system to monitor illicit trade practices on the volatile local bourse,it has been established.
The new system is expected to enhance market integrity and safeguard the interest of investors.
The latest development was revealed by the Finance and Economic Development Minister, Mthuli Ncube, who said the system will monitor implementation of measures to curb illegal activities on the stock market.
“The ZSE is in the final stages of procurement of a market surveillance system to ensure implementation of measures to curb manipulation of the stock market and other illicit practices,’’ Ncube said.
It comes at a time when the local bourse has been subject to manipulation through speculative trading that drove inflation upwards.
There have been serious malpractices at the ZSE believed to be part of activities that fueled parallel market activities.
The deficiencies in the ZSE system allowed clients to sell shares and transfer proceeds to third parties for speculative trading in forex.
Consequently, the government, through Statutory Instrument (SI) 103A, gazetted new regulations to operationalise its directive for tighter conditions on trading of securities on ZSE.
Blame has also been placed on the doorsteps of brokers, who have been accused of initiating part of the illegal and speculative activities that fueled depreciation of the Zimbabwe dollar through the transfer of funds between brokers’ sub accounts. These have since been outlawed by the government, clipping the wings of rogue brokers.
Government also doubled capital gains tax on shares for 270 days or less to 40% from 20%, a move meant to promote long-term investment on the ZSE. The 20% tax level was seen as not deterrent enough to discourage speculative trading in shares.
The speculators used the price bubble on the ZSE to make huge profits as the bulls kept charging at the local bourse, resulting in the market capitalisation rocketing to ZWL$3.5 trillion in April this year, from ZWL$1.3 trillion in January this year. The bullish sentiment also resulted in a brutal attack on the Zimbabwe dollar in the parallel market.
However, since the gazetting of SI 103A,which curbed speculative trading on the stock market, the ZSE has been experiencing a bearish sentiment, with the market capitalisation declining to ZWL$1.7 trillion this week.
The measures which were put forward in May this year resulted in a liquidity squeeze which also depressed trading activity on the local market with investors continuously losing money.