Old Mutual, PPC & SeedCo remain suspended on the ZSE

Trading resumed on the Zimbabwean Stock Exchange this week after a month of being shut down by the government in a bid to clamp down on alleged illegal activities. The closure of the stock exchange and mobile money payments had significant implications for investors and the economy as a whole. Despite the bourse being operational again, three prominent stocks remain suspended: Old Mutual, PPC, and SeedCo. Batanai Matsika, Head of Research at Morgan & Co, shed some light on the situation during an interview with CNBC Africa. The closure of the Zimbabwean Stock Exchange had a detrimental impact on investor sentiment and settlement processes, particularly due to the lack of clarity surrounding the government's decision. The suspension stemmed from concerns over implied exchange rates calculated on dual-listed companies, with Old Mutual being a notable example. The use of black market rates for these calculations exacerbated the exchange rate issue, which in turn, had inflationary implications. The government's response to this was to suspend trading in these dual-listed companies, including Old Mutual. Following the resumption of trading, the Zimbabwean Stock Exchange is experiencing significantly reduced trading volumes, with daily turnovers averaging around 15 million Zimbabwean dollars, equivalent to approximately 150,000 USD. These figures pale in comparison to the trading volumes observed during the multi-currency regime, where turnovers reached up to several million USD per day. This dramatic decline underscores the challenges faced by investors in the current economic climate. The government's focus on dual-listed companies and their perceived role in foreign exchange dealings has raised questions about the true motivations behind the stock exchange suspension. While the government attributes the economic challenges to these companies, some experts believe it is a scapegoat tactic. The underlying issues facing Zimbabwe, including foreign currency shortages and low productivity, need to be addressed through targeted policy measures rather than targeting specific companies. In response to the suspension of Old Mutual, PPC, and SeedCo, authorities are exploring the establishment of an alternative hard currency exchange as a potential solution. The proposed exchange would facilitate trading in foreign currency, addressing concerns related to the use of implied exchange rates. This initiative aims to attract companies seeking to raise capital in hard currencies, providing them with a viable platform for market participation. However, questions remain about the viability of this new exchange and its ability to attract investors, especially given the existing challenges within the Zimbabwean economy. Foreign investors face restrictions on repatriating dividends, adding another layer of complexity to the investment landscape. Uncertainty looms over the fate of dual-listed companies and the broader stock market, underscoring the need for comprehensive reforms to restore confidence and stability in Zimbabwe's financial markets.