Can amateur traders transform ZSE?

Mid-September last year, in a tweet, Zimbabwe Stock Exchange chief executive officer Justin Bgoni, made an interesting comment but sad fact with regards the lack of participation on the equities market by Zimbabweans.

The tweet read: “The need for ordinary Zimbabweans to participate on ZSE remains a big concern. With daily trades around 300 in a country of 14 million people, we have not yet cracked this… We have not given up!”

Having worked in the stockbroking environment for a number of years, this tweet did not come as a surprise to me. It was a well-known and concerning fact.

Early last year, I had also embarked on a mission to spread the gospel of stock market investing using Twitter as a broadcasting platform. In May 2020, I started doing the same on the Whatsapp platform, and now have more than 10 full groups and counting. On my Youtube channel, the message is the same. The gospel of stock market investing is surely spreading and fast.

The ZSE itself, also took the initiative to bring the equities market to the people and launched an online trading platform, ZSEdirect, targeted for the retail investor.

The combined efforts by the ZSE and many others who preach the gospel of stock market investing has started paying off.

Towards the end of January this year, Bgoni tweeted again: “We have noticed that ~20 percent of the number of trades (not value) on ZSE are now coming from retail clients through ZSE Direct. Thank you for trusting us. We know we need to do more and thank you for your continued feedback. Tatenda!Siyabonga!”

This week, at the Zimbabwe Finance Online Conference, organised by Business Weekly and the Financial Markets Indaba, Bgoni had another set of good news.

“Over the past months, we have noticed a significant growth in retail participation in terms of Number, Value and Volume of Trades. It’s almost like a hockey stick growth all the way” he said. The accompanying graph tell the whole story.

Bgoni also took time to explain why it is important to increase the participation of retail investors on the local stock exchange.

“Retail investors contribute positively to both market liquidity and resilience; other exchanges have been promoting retail participation over the past years.

“Retail investors also give our market relevance, because when it is seen as the preserve of the elite, it has no relevance to the majority of Zimbabweans,” he said.

Retail participation also tends to counter institutional investors when they crystalise their returns during market downturns.

Bgoni’s comments comes at a time retail investor trading boom is a global phenomenon, with stock trading clubs, messaging groups, chat forums and even “rooms” on audio social networking site Clubhouse mushrooming across the world.

With online platforms and applications such as ZSEdirect and C-trade respectively, retail investors can now easily trade on the bus, at home, or over tea breaks at work.

A retail investor is a non-institutional investor in securities such as stocks. You could say this is the average Zimbabwean who buys or sells stocks.

While global numbers of retail investors have grown exponentially, in Zimbabwe we have just scratched the surface according to Bgoni.

“We believe overall our retail participation is quite low at the moment…We need to bring it up to decent amounts”.

For the numbers to grow, there is need to continue working on improving user interfaces and to leverage on social media. While there were internet forums and newsletters in the 1990s, the current social media environment is radically more powerful. The power of social media is adding verve to the trend.

Awareness campaigns also need to be increased so that many people can realise that retail investing is an opportunity to build a solid investment portfolio. The vast majority of people fall into the category of being a retail investor, and it’s a title that every Zimbabwean should embrace as an opportunity. Every Zimbabwean should be regularly investing in the stock market and building a retirement portfolio of secure stocks that will stand the test of time.

Need for guidance

Of course, to do it properly and to minimise risk, there is need for guidance around buying and selling stocks. There is no doubt lack of guidance can become disastrous. A lack of investing education means money can languish in a poorly performing stock. Retail investors usually don’t know the ins and outs of how to find good stocks. Thankfully, the ZSE has a training institute to cater for that, while industry regulator, the Securities and Exchange Commission of Zimbabwe, has also embarked on investor education campaigns. -ebusinessweekly.co.zw