THE recent upsurge in the Old Mutual share price shows that some investors are benefiting from the mismatch between the counter’s price on the
local bourse and that on the London Stock Exchange.
Analysts this week said the counter was performing very strongly on the back of arbitrageurs as investors were buying and transferring the share to the London register to obtain foreign currency.
“While this has been beneficial to the arbitrageurs, it has also helped in bringing in foreign currency and local investors have gained because the share price has risen substantially,” said a market analyst.
He said to investors outside Zimbabwe, the stock is trading at a huge discount.
Old Mutual is also listed on stock exchanges in London, Johannesburg, Namibia and Malawi.
“Many investors are scurrying to buy shares on the counter anticipating to cash in on the hefty dividend that the company said it would declare,” the analyst said.
Old Mutual and British American Tobacco Zimbabwe (BAT)’s share prices reached the half a million dollar mark last week after a resurgence of bulls in a market that had become characterised by bears in the past three months.
The two counters have been trading firmer since the beginning of the second quarter.
The upward movement of BAT’s share price has been attributed to the opening of the tobacco auction floors on Tuesday.
Pretoria Portland Cement Company (PPC) was the first counter on the local bourse to surpass the 500 000-point mark.
The counter’s share price is currently hovering around the $8 500 000 mark.
However, analysts said the increase in the share prices did not translate into a company’s bottom line earnings.
“Share price movements do not have a direct impact on the company’s earnings. This explains why some companies release lukewarm results despite having their share prices on the run for the greater part of the reporting season,” a stock market analyst said.