BUSINESS REPORTER
The exodus of counters from the Zimbabwe Stock Exchange (ZSE) to the Victoria Falls Stock Exchange (VFEX) will continue this year amid the appreciation of share prices of companies that migrated to the dollar-only bourse, a securities firm has said.
Since it debuted in October 2020, the VFEX has attracted four companies—Padenga, Bindura Nickel Corporation, Simbisa and National Foods—that have migrated from ZSE.
Consumer staples concern Innscor and Axia Corporation will migrate to the VFEX during the course of 2023.
In total, eight counters are listed on the dollar-denominated bourse.
“We are of the view that the exodus of counters from the ZSE to the VFEX will continue in 2023 as companies take advantage of the benefits on the bourse,” IH Securities said in an Equity Strategy 2023 report.
The VFEX has rolled out a number of incentives to lure new listings. The trading costs on the VFEX at 2.12% are lower than the 4.63% prevailing on the ZSE.
The dollar-denominated bourse offers tax incentives for shareholders which include a 5% withholding tax on dividends for foreign investors compared to a withholding tax of 10% for non-resident shareholders on the ZSE.
There is no capital gains tax on VFEX compared to 40% on the ZSE. Companies see the VFEX as enhancing regional profile and commercial standing, thereby creating pathways to local and regional prospects.
Companies listed on the VFEX have seen appreciation in share price as prices adjust to fair value.
“There has been capital appreciation for companies that migrated from the ZSE to the VFEX except for BNC on the back of exchange rate distortions and lack of ZWL liquidity on the ZSE which has resulted in the latter being undervalued,” IH Securities said.
The securities firm expects to see the listed entities registering growth both organically and through acquisitions with the ability to raise foreign currency capital on the VFEX.
“We are of the view that companies like Simbisa Brands Limited will continue expanding their footprints into the region. Caledonia is expected to continue expanding its mining assets with the company having recently acquired Bilboes Gold making it one of the largest mining companies in Zimbabwe. Another expansion initiative underway is the development of the Karo project, aided by a capital raise via bond instrument issuance. We expect the same themes to prevail on the VFEX in 2023.”
