Ruling party recommends USD only trading platform for Old Mutual

Ruling party recommends USD only trading platform for Old Mutual

 Staff Reporter

HARARE, The ruling party, Zanu Pf has reaffirmed its position of having Old Mutual delisted from  the Zimbabwe Stock Exchange (ZSE), saying  the bourse should create  a USD only trading platform for the diversified insurer and financial services giant.

Under this arrangement, Old Mutual Limited can then be allowed to migrate, find home and trade on such a foreign currency denominated counter in Zimbabwe.

Acting Secretary for Information and Publicity  ZanuPF Party Spokesperson Patrick  Chinamasa  in a statement  said trading on other counters has been normal and the Party is recommending that trading be resumed.

“Setting up a foreign exchange denominated stock exchange is an appropriate institution for raising and attracting foreign direct investment into Zimbabwe. Companies that want to invest in Zimbabwe and requiring foreign currency would then list on such a stock exchange to attract foreign direct investment in foreign currency for investment. The details of implementing this recommendation is left to government including the timeframe within which this recommendation can be implemented.

“It is the desire of ZANU PF that implementation be in the shortest possible time to avoid undue disruption to inflows of investment capital. ZANU PF says an emphatic NO, to self-enrichment through speculative trading and externalization,” he said.

This follows concerns by government that distortions  were emanating from the Old Mutual share being traded on multiple stock exchange counters fundamentally from differences from the relative strengths of the underlying economies in which the Old Mutual shares are listed.

According to Chinamasa,  this fact alone has created opportunity for fungibility to generate arbitrage gains.
“Fungibility creates opportunity for speculation as there are arbitrage opportunities to trade the share between Zimbabwe and other stock exchanges. This speculation may distort the foreign currency market,” he said.

He added that fungibility is open to the risk of being abused as has been the case in Zimbabwe and has become a vehicle to externalize capital out of Zimbabwe.

Allowing the Old Mutual share to be traded on multiple stock exchanges has given rise to the Old Mutual Implied Rate (OMIR). Fungibility has created an opportunity for the determination of foreign exchange rate in Zimbabwe to be determined from activities emanating from actions of speculators operating on the stock exchange,” he said.

Before suspending trading ZSE, government had previously suspended fungible stocks from trading on the bourse. These included OM,  PPC and Seedco.

Old Mutual has 65 718 552 shares listed on the ZSE with a market value estimated at SAR849million.
In Zimbabwe, Old Mutual Limited has 30 168 shareholders made up of pension funds, local institutions and individuals.