The introduction of SI 142 of 2019, which abolished use of foreign currency and reinforcing bond and RTGS as legal tender in Zimbabwe made some changes to the Zimbabwe Stock Exchange (ZSE). The main change that has been derived from this is the coming in of the Exchange Control Directive RU102/2019 which enforces investors on dual listed shares to purchase sell their shares after 90 days of purchase.
The RU102/2019 says:
“Authorised Dealers are advised that with effect from 25 June 2019, any investor who shall purchase a dual listed share on the Zimbabwe Stock Exchange (ZSE) shall only be allowed to sell the share on the ZSE or on an external stock exchange after a vesting period of ninety (90) days from the date of initial purchase.
For investors wishing to uplift dual-listed shares from external bourses for purposes of selling the shares on the ZSE, such sales shall only be allowed to be executed after a period of ninety (90) days from the date of registration on the ZSE.
For investors who have already acquired the dual-listed shares on the ZSE and are desirous of disposing of such shares, Exchange Control directs that such sales can only be allowed in instances where the shares have been purchased on or before 20 March 2019.
The procedures for trading in dual-listed shares on the ZSE as previously communicated by Exchange Control on 26 May 2016 shall remain operational.”
But what could this mean for shareholders who want to invest in such shares?
An analyst on Zimbabwe Professor Alex Magaisa says that the directive attempts to minimise speculative activity on such shares by placing a 90-day requirement between trades in the shares.
“There has long been a concern that speculators are exploiting the arbitrage opportunities offered by companies that are listed on the Zimbabwe Stock Exchange and another exchange such as the JSE or LSE,” Magaisa says.
“The argument is that the parallel market rate often tracks the Ol Mutual Implied Rate which is derived from the difference between the share price of Old Mutual on the ZSE and LSE.”
“So if one buys an Ild Mutual share on the ZSE, they can only sell that share on the ZSE or the other exchange after 90 days. The downside is that this intervention affects the liquidity of the market in respect of such shares and might have repercussions for the ZSE,” the Professor explained.
PPC which holds dual shares in South Africa and Zimbabwe offered a notice to shareholders that they should carefully consider these changes and implications when trading their shares.