THE decline in the turnover on the Zimbabwe Stock Exchange (ZSE) during the first half of the year will affect the profitability of stockbroking firms in the country that have been struggling with the absence of the bond market.
BY VICTORIA MTOMBA
The turnover of the ZSE went down by 41,69% to $137 million from $234 million in the same period last year.
Stockbroking firms buy and sell stocks and other securities for both retail and institutional clients through a stock exchange in return for a fee or commission.
“The impact on stockbrokers is the denting of investor confidence for the few foreign investors in that market. Broking firms are seriously affected by the decline in turnover. That’s why the stockbrokers are trying to develop the bond market and small and medium enterprises to broaden our markets,” a player said. He said a number of stockbrokers were operating using the 2009 cost structure which was high and needed to be streamlined in line with the changes in the economy.
Zimbabwe has 13 stockbroking firms. Of that five — Imara, Lynton Edward, IH Securities, ABC Securities and FBC Securities — control over 70% of the market, leaving the remainder fighting for crumbs. A local analyst said the business model for securities requires them to earn more commission through many transactions. Stockbroking firms earn 0,92% commission on the value of the transaction.
“The stockbroking firms are facing structural challenges as the appetite is waning as witnessed in the decline in market capitalisation by a billion during the first half of this year as compared to last year,” the analyst said.
According to Statutory Instrument 100 of 2010, a stockbroking firm must have a minimum capital of $150 000 or 13 weeks’ working capital.
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Market capitalisation of the local bourse declined to $3,8 billion from $4,8 billion the same period last year. The analyst said when stock market prices are low, the market should attract more investors. Yet investors still feel that the stock prices are still very high.
“If the obtaining challenges persist, we are likely to witness the closure of five stockbroking firms closing down as they will be failing to meet the capital requirements. If you continue to have losses, you will end up getting into the regulatory capital and end up going to the deep end,” the analyst said.
Securities Exchange of Zimbabwe chief executive officer Tafadzwa Chinamo said stockbrokers need to increase their earnings and to make trading easy to increase traffic on the local bourse. “They have to make trading an easy operation for ordinary investors so that they will be able to access the market through the laptop, mobile phone and volumes will go up,” Chinamo said. He said that the broker’s fate is dependend on the stock market and therefore they should vote for people who can carry the local bourse forward.
Under the rules and regulations, stockbroking firms are supposed to have two licensed dealers.
Stockbroking firms are required to pay $3 000 while stockbrokers pay $500 per person.
The industrial index stood at 148,40 points by end of June this year while the mining index stood at 44,30 points compared to 61,32 points during the same period last year.
