The migration of a number of companies from the Zimbabwe Stock Exchange (ZSE) to the US dollar-denominated Victoria Falls Stock Exchange (VFEX) is expected to continue and result in some key changes on the main exchange.
Last month, industrial conglomerate Innscor Africa Limited migrated to the VFEX, trailing the likes of National Foods and Simbisa Brands, which switched to the new bourse last year.
Analysts expect this trend to continue this year. Apart from the reduced number of stocks and market capitalisation, as big caps like Innscor transfer their shares to the VFEX, Exchange Traded Funds (ETFs) will be greatly affected by the migrations.
Several counters tracked by some ETFs have migrated to the US dollar-based stock exchange while others are yet to follow the ‘Great Trek’ as they seek to unlock value and raise capital in hard currency.
Indications are that the ETFs constituents will be reconstructed in line with the shift in the overall ZSE constituents. In an earlier interview, ZSE chief executive officer Justin Bgoni revealed the ETFs constituents would be reconstructed to reflect the changes following the migrations.
The ZSE has five ETFs namely the Cass Saddle Agric, Datvest Modified Consumer Staples, Morgan & Co Made in Zim, Morgan & Co Multi-Sector and the Old Mutual ZSE Top 10.
During the last quarter of 2022 alone, National Foods (Natfoods) and Simbisa Brands moved to the VFEX. The two stocks have been part of the Old Mutual ZSE Top 10 ETF as well as the Datvest ETF. The Cass Saddle Agric ETF also tracked Natfoods.
Mr Bgoni said: “The ETFs will need to be reconstituted.”
Axia and Seed Co Limited has also indicated plans to migrate to the VFEX early this year. Both Innscor and Axia have been also part of the Old Mutual ETFs following a rebalancing done during the quarter to June 30, 2022.
Outside the migrations to the VFEX, the Old Mutual ZSE Top 10 ETF is rebalanced on a quarterly basis in line with the obtaining top 10 counters. Lately, African Sun has become part of the ZSE Top 10, therefore now part of the Old Mutual ZSE Top 10 ETF.
The hospitality group has also indicated its plans to also migrate to the VFEX.
ETFs are baskets of different types of investments such as stocks, commodities and bonds that are pooled into a single entity, which then offers shares to investors that are subsequently traded on major stock exchanges.
Zimbabwe became the fifth country in Africa to list an ETF, with South Africa, Nigeria, Kenya, and Egypt also currently trading the instrument.
According to the ZSE, prospects are high for more ETF listings on both the ZSE and the VFEX this year on increased issuer appetite as well as interest from investors.
