eBusiness Weekly
Kudzanai Sharara
Taking Stock
“We wanted to do a soft launch today (February 9, 2020) and announce it a day or two later. The streets were too fast for us.”
The above tweet by the Zimbabwe Stock Exchange chief executive officer Justin Bgoni, could pass as any other normal tweet if it’s not contextualised.
While the tweet focused on what had happened with regard the introduction of the Old Mutual Top 10 ETF on ZSE’s online trading platform, ZSEDirect, it was also an indication of developments that are taking place on the local equities market.
A bit of background
The Old Mutual Top 10 Exchange Traded Fund (ETF) is a new product on the ZSE. The ZSE is largely known as a market for trading shares, but on January 4 it introduced a new product, the ETF.
However, unlike ordinary shares, the ETF was initially not introduced on the ZSEDirect trading platform, largely used by retail investors.
To buy the ETF units, one had to go through traditional stockbrokers. This meant most retail investors, who had only opened accounts on ZSEDirect, could not buy the shares, for more than a month.
While before and at launch, there were doubts on how the ETF would perform, it has since proven to be one of the top performers on the ZSE.
By the time when it was put on ZSEDirect, it had already gained upwards of 85 percent beating the ZSE average gain of below 60 percent. This made it even more attractive to the retail investors watching on the side-lines.
On Monday this week, the ZSE quietly put it on ZSEDirect so it could do some tests before launch. But as Bgoni says, the streets were too fast.
Word soon spread that the ETF was now accessible on ZSEDirect. The excitement was overwhelming and probably prompting Bgoni to question whether the investment instrument was fully understood by the market, retail investors in particular. Many of them just starting their investment journey.
“After advice from a dear friend of mine I will try to educate the market on Exchange Traded Funds or simply known as ETFs,” Bgoni tweeted.
He added that the exchange had decided to hold the free seminar “given the significant interest in ETFs”.
The broader picture
As much as the ETF has drawn so much interest from retail investors, the interest in investing on the stock market, in general, is growing. Since its launch, the ZSEDirect already has approximately 5 000 registered investors, mostly retail investors. Another online trading platform C-Trade is reportedly registering phenomenal growth in retail investors.
Before this, the ZSE was known as a preserve of a few — the elite. But a lot more people are getting interested and a lot more in future if the trend continues.
It’s important to have more players
Markets function better when they include more people and, when they meet evolving consumer and regulatory expectations, become a force to help societies confront widening inequality, narrow and help solve the social challenges ahead.
Larger markets mean greater liquidity, the opportunity to sell and resell equity interests to an ever-growing pool of investors.
It is thus commendable that our markets are now inclusive. However, as investors become more distributed, it becomes more important to ensure that the information they trade upon is true. The regulators must insist that companies keep good records and honour investors’ interests.
Markets are meant to be facilitators — a source of information, innovation, and inclusion. Once that is achieved industries could be financed by investors eager for new opportunities, trading ideas, and capital to work together.
Need for education
The steps being taken by Bgoni, to educate investors, is important.
In his financial work, “Confusion de Confusions” (1688) Del la Vega, summed up four basic rules about stock market investing.
His third rule was that profit in the equities market is a goblin’s treasure: at one moment, it is carbuncles, the next it is coal; one moment diamonds, and the next pebbles.
Sometimes they are the tears that Aurora leaves on the sweet morning’s grass, at other times, they are just tears. Investors must know the market is made up of risks and returns or put differently, profits and losses.
