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Foreign investors boost local capital markets

At least 2 548 accounts have been opened on the Central Securities Depository (CSD).

BY TARISAI MANDIZHA

Chengetedzai Depository Company, board chairman Zwelibanzi Ndlovu told a 2015 Buy Zimbabwe Summit last week that of the accounts opened locals had 1 784, while foreigners accounted for 754, signalling that investors had confidence in the market.

A CSD is a system that maintains an electronic register of securities or financial instruments such as shares, bonds and other fixed income instruments and provides an efficient settlement process.
The records are kept in an electronic form and transfer is by way of electronic book entry.
The CSD went live in September last year.

“These 2 548 accounts are composite in nature, with 754 accounts held by foreign investors while the remaining 1 784 are held by local investors,” he said, adding that of the $3,9 billion market capitalisation the CSD had, foreign accounts accounted for $1,355 billion.

“It shows they now have trust in our capital markets. Before the CSD we used to have challenges in the certificated securities system that tended to slow down the growth of the capital market such as loss of certificates, forgery, mutilation and theft of certificates,” Ndlovu said.

He said the coming on board of the CSD was a significant milestone for the country’s capital market and the company in general.

“For starters, this has significantly reduced transaction days so that seller and buyer are satisfied, we even have T+0 transactions available now, whereby the buyer gets their share certificate on the very same day that the transaction would have taken place,” he said.

Ndlovu said the company initially introduced the T+5 (transaction plus five days) transactions in order to allow the market to adjust to the efficiency systems.

He said in order for the financial sector to succeed in attracting capital, investors needed to be assured of the safety of their investments and efficiency and transparency in the operation of the markets.

“Indeed, the CSD will eliminate some of the challenges in the certificated securities system that tendered to slow down the growth of the capital markets such as loss of certificates, forgery, mutilation and theft of certificates, and also to reduce settlement risk and the processing time,” he said.

Ndlovu said government recognised the CSD as an important market infrastructure for ensuring efficiency and promoting accountability and transparency in the management of the country’s capital market.
A CSD is an organisation holding securities either in certificated or uncertificated (dematerialised) form to enable book entry transfer of securities.

CSD will run alongside the automation of the local bourse. ZSE recently said the electronic trading of shares would start on July 3.

Finance and Economic Development minister Patrick Chinamasa recently said the capital markets needed to embrace efficiency to attract investors, thereby resuscitating the productive sector.

The ZSE presently uses a call over system on the floor of the stock exchange and is operating on a T+7 (transaction plus seven days) transaction settlement system.

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