[2008-08-04]  ZSE cuts settlement cycle
THE Zimbabwe Stock Exchange last Friday reduced the settlement cycle to plus three days (T+3) from the previous plus seven days (T+7) as the market cuts the costly effects of inflation.

This means equity payment would be reduced to a maximum of three days from the day of sale.

Investors were losing value selling shares today and receiving payment only after seven working days.

A stockbroker who spoke to the Herald Business said deliberations were underway to further shorten it to T+1 in the face of runway inflation, estimated at 2,2 million percent.

"It (T+3) has started today (Friday). Equity payments are now paid three working days after the sale and deliberations are underway to further reduce it to T+1," said a stockbroker who preferred anonymity.

As a result of rising inflation, the local currency has been loosing value. No comment could immediately be obtained from ZSE chief executive Mr Emmanuel Munyukwi who was said to be out of the country.

But the ZSE committee said in a statement last week that: "With effect from that date (August 1) no sale orders will be executed by stockbrokers unless the relevant securities are held by stockbrokers or satisfactory arrangement have been concluded to deliver the scrip on or before settlement.

"Stockbrokers will not execute purchase orders unless payment is made in advance or satisfactory arrangements have been concluded to effect the payment or on before the settlement date.

"These measures are being introduced to protect investors in the current hyperinflationary environ-ment."

Last year, the ZSE committee discussed the possibility of shortening the settlement period to one day over a period of time but currently, the domestic bourse does not have the infrastructure to facilitate the transfer of shares and money between buyers and sellers on a daily basis.

Elsewhere in other African stock exchanges the more common settlement periods are T+5 and T+4.

In Botswana, the settlement period is at four, Ghana Stock Exchange is at five and the JSE is at five and is planning to shorten the period to three.

The above countries have fairly stable currencies and manageable inflation levels.

An investment analyst with a stockbroking firm said the ZSE committee has "acted appropriately" and hoped a decision for T+1 would be reached soon.

The stock market has been the preferred choice of investment over the last few years, as hedge against inflation. The mainstream industrial index has posted a year-to-date growth of more than 12 million percent while minings are up over 11,9 million percent since January
Source: Herald