…Profiling ETFs on the ZSE
By Albert Nangara
- An exchange-traded fund (ETF) is a marketable security that tracks an index, sector, commodity, or other asset but can be purchased or sold on a stock exchange the same way a regular stock can.
- Zimbabwe became the fifth country in Africa to list an ETF, with South Africa, Nigeria, Kenya, and Egypt also currently trading the instrument.
In Zimbabwe, investing in Exchange Traded Funds (ETFs) is witnessing traction and various ETFs of different types are emerging. It is easy to invest in an ETF, but before you invest, ensure that you choose the one that suits your financial plan the most.
Investing in ETFs, or exchange-traded funds, is equivalent to investing in all constituents that are part of an index directly. According to Forbes, the yields or returns generated by ETFs replicate the benchmark index. It gives investors an opportunity to benefit from the diversity, flexibility, and scope for growth that come from ETFs being traded on 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.
Here is the list of exchange traded funds (ETFs) on the Zimbabwe Stock Exchange (ZSE):
Old Mutual Zimbabwe ZSE Top 10 ETF
The Old Mutual Zimbabwe ZSE Top 10 ETF was introduced by Pan-African financial services group Old Mutual.
The fund tracks the ZSE Top 10 Index, which consists of the largest ten companies, as ranked by investable market capitalization, listed on ZSE. CABS Custodial Services is the fund’s custodian, while Stanbic Bank is the trustee.
The constituents reflect the ZSE Top Ten Index, which is independently calculated and managed by the Zimbabwe Stock Exchange. Rebalancing of the ETF is done every quarter.
Due to the fund’s small number of constituents, it is naturally highly concentrated, with the two largest companies—beverage manufacturer Delta Corporation and telecommunications behemoth Econet Wireless Zimbabwe—accounting for weights of 25.03 percent and 23.47 percent, respectively. The next largest stocks in the fund are Innscor Africa (12.84 percent), EcoCash Holdings (9.97 percent) and the financial services conglomerate CBZ Holdings (4.97 percent).
Morgan & Co Multi-Sector ETF (MCMSETF)
The Morgan & Co Multi-Sector ETF is Zimbabwe’s first actively managed exchange traded fund. According to the Morgan & Co website, the Morgan & Co Multi-Sector ETF is an actively managed ETF with the goal of beating the ZSE All Share while boasting a low-cost structure. The ETF aims to earn alpha for investors by taking long positions in fundamentally undervalued sectors. The ETF is benchmarked against the ZSE All Share Index.
As we can see from the image, the constituents of the MCMSETF are FINSEC listed Old Mutual Zimbabwe Limited, NMBZ Bank, First Mutual Holdings Limited, First Capital Bank, Zimre Holdings Limited, and financial services conglomerate CBZ Holdings. Initially, the focus is on the financial and banking sectors.
Morgan & Co Made In Zimbabwe ETF
The Morgan & Co Made In Zimbabwe ETF is an actively managed fund which primarily invests in Zimbabwean manufacturing companies. Normally, at least 80 percent of the fund will be invested in Zimbabwean manufacturing companies whose revenues are primarily derived from manufacturing processes, while 20 percent may be invested in companies that fall outside of this scope. The manager, Zimnat Asset Management, primarily allocates the fund’s portfolio investments using a proprietary model developed by Morgan & Co.
Morgan & Co’s Made in Zimbabwe ETF has 10 equities for manufacturing firms of different weights. Amalgamated Regional Trading (40.18 percent), Nampak Zimbabwe (18.48 percent), Hippo Valley (14.71 percent), Delta Corporation (417.85 percent), StarAfrica (3.75 percent), British American Tobacco (2.42 percent), Innscor Africa (1.34 percent), and Lafarge Cement (0.56 percent) are the companies involved.
Datvest Modified Consumer Staples ETF
The Datvest Modified Consumer Staples Exchange Traded tracks the performance of the Zimbabwe Stock Exchange listed companies within consumer staples.
According to a prospectus statement for the Datvest ETF, CBZ Asset Management has initial seed capital in the form of scrip in the exact weights of the ZSE Modified Consumer Staples Index.
The term “consumer staples” refers to a set of essential products used by consumers. This category includes things like foods and beverages, household goods, and hygiene products, as well as alcohol and tobacco.
and their respective weights. (Photo/ CBZ)
Delta, Innscor, National Foods, Meikles, Simbisa Brands, OK Zimbabwe, TSL, Dairiboard, and African Distillers are among the consumer stocks that make up the Datvest ETF.
Cass Saddle’s Agriculture ETF
The ETF, which was listed by way of introduction, took off with a seed capital of $36 199 404 and also became the fifth overall security listing on the ZSE this year, after it was officially registered.
Cass Saddle is an agri-focused asset management company that is licensed by the Securities and Exchange Commission of Zimbabwe (SECZim). The asset manager offers institutional fund management, individual wealth management, investment services and advisory.
According to the prospectus, CABS Custodial Services is the ETF custodian; thus it will hold the assets of the fund, whilst CABS Trustee Services is the trustee.
According to ZSE chairperson Caroline Sandura, the agriculture sector is well documented as one of the key pillars of the Zimbabwean economy, contributing an average of 10% to GDP over the last five years and slightly more than $1 billion in export receipts in 2021.
“The agriculture sector also supplies up to 60 percent of the raw materials required by industry. It is therefore commendable that Cass Saddle Asset Management picked this important sector for their ETF,” she said.
The index’s first ten counters are National Foods with a weight of 28%, BAT with 15%, Tanganda with 12%, Hippo Valley with 11%, SeedCo with 9%, TSL with 9%, CFI with 8%, Dairibord with 3%, Zimplow and Ariston with 1% each, and Cash with 3%.
At the end of the last weekday of trading on the ZSE, a total of 900,500 shares, corresponding to a market value of ZWL 41,042,437.88, were traded. The data shows an 83 percent decline in volume and an 82 percent decline in turnover. The current market capitalization of the Zimbabwe Stock Exchange is ZWL 1.82 trillion.
The benchmark ZSE All Share Index rose 1,101.20 (10.46 percent) points to close at 11,629.65, representing a 12.1 percent one-week gain, a 17.35 percent four-week loss, and a 7.46 percent year-to-date gain.
