ZIMBABWEAN stocks are undervalued, as evidenced by lower market capitalisation compared to numbers obtaining in the region, despite the Zimbabwe Stock Exchange (ZSE) having more listed companies, Finance Minister Tendai Biti said on Wednesday.
Market capitalisation — measured by multiplying the total number of shares of stock, listed entities and the prices — is closely followed by investors to judge the performance of any bourse.
“For example, as at 30th September 2010, the capitalisation of the ZSE (Zimbabwe Stock Exchange) was US$3, 4 billion which is less than that of the Lusaka Stock Exchange (US$5, 3 billion) which has fewer listed companies. This comparison shows that Zimbabwean stocks are undervalued,” Biti told stakeholders at a pre-budget consultation workshop.
There are 22 counters on the Lusaka Stock Exchange while ZSE has 76 companies trading.
Biti said government is willing to consider additional proposals to improve the performance of the industry in addition to the slashing of transactional costs early this year.
Government slashed the transaction costs on the buying and selling of shares to 3, 5% from 7, 5% to bolster activity on the bourse. The move was also designed to align the transactional costs to those obtaining in the region.
Biti said the security industry needs to modernise its trading and settlement infrastructure to meet world standards.
“The introduction of an Automation Trading System would improve efficiency on the stock exchange by reducing transaction cycles while the establishment of a Central Securities Depository would facilitate the maintenance of settlement and ownership records,” he said.
Market capitalisation on ZSE started well this year and reached US$3, 9 billion on January 29.
But the gazetting of the regulations governing the empowerment laws dragged market capitalisation to US$3 billion. As of Thursday market capitalisation stood at US$3, 6 billion.
The stock exchange shows the health of a nation.
The low performance of ZSE eats into the commission of the 20 stockbrokers who derive their incomes from increased volume of trade on the bourse. Brokers are still smarting from halving of commission on the trading of shares to 1% effective January this year.

By The Standard