Old Mutual falls 19.91% after Mthuli removes fungibility

 Old Mutual falls 19.91% after Mthuli removes fungibility
Published: 16 March 2020
Old Mutual Limited fell 19.91% on Monday as the stock market reacted to Government's latest measures to stabilise the exchange rate.
Yesterday, the Ministry of Finance and Economic Development suspended fungibility on Old Mutual, PPC and Seed Co International in order to remove the implied rate as a benchmark which determine parallel market rates and to also remove the abuse and arbitrage opportunities arising from it. This is in spite of the fact that the OMIR is more of a mirror of exchange rate weakness rather than the cause it.
However the Ministry of Finance believes that attacking the OMIR alongside other measures which will be announced in the coming days, will quickly flatten or invert the exchange rate projections and see the ZWL closer to the rand rate of just above 16.5x to the US dollar.

At close, Old Mutual traded closer to limit down, after losing 19.91%  to 4262.13c - but with a last transaction price of 4260c - giving an implied rate of 61.37 and what could have been an arbitrage profit of 221.3%. Volume was at 60 200 shares worth 2.65 million amid indications that the stock will recover as it remains a favoured hedging stock against inflation, which came in at 540.16% in February (annualised) and had a sharp jump of more than 11 percentage points month-on-month.

The new measure saw foreign investor participation fall to very insignificant levels as entering and exiting through Old Mutual was a viable way for foreign funds who now have to go to the allocation queue at interbank rates. Foreign buyers were at $1 500 in volume of 200 shares invested in Delta while sales were in Meikles at $2 622.75 after 269 shares changed hands.

Turnover opened the week at $22.8 million with Afsun contributing $9.2m. Innscor $3.1m, Delta $2.9m, Old Mutual $2.6m, Econet $1.2m, Axia and OK ZIM $1.1m and Padenga with $1m were the other stocks to contribute over a million turnover.

The Top 10 index opened the week 4.41% down to 426.08. Padenga eased 4.47% to 586.55c, while conglomerate Meikles traded 11.76% weaker to 858.33c. Beverage maker Delta was also down 7.81% to 688.27c.

The All Share Index was down 3.31% to 504.90 on the back of investor cautiousness. The Small cap index was also down as it lost 2.75% to 1,469.26 as the Medium Cap index closed in the negative as it was down 1.12% to 687.81.

Seedco International which is part of the suspended fungible stocks was up 0.84% to 500.60c. RioZim traded 16.62% lower to 612.00c to complete the top five fallers of the day.

Willdale traded 4.00% lower at 7.20c ahead of its AGM this Thursday. In its trading update for the first quarter, the company said sales volumes were 15% lower than the same period last year as a result of declining effective demand. Selling was being ramped up targeting funded government projects and cluster housing development while riding on short lead times enabled by high stock levels.

First Mutual, which is currently trading under caution pending a transaction, was up 1.46% to 91.50c. Hippo continued to rise as it added 2.21% to end at 773.78c as it continues to look for more export markets. Heavyweight BAT was up 2.86% to 9900.00c ahead of the imminent release of its December full year results.

On the sectors, the Financials Index was 8.77% down to 675.06, becoming the worst performer, while the Real Estate Index was the best performer with a 10.10% gain to 821.03.
- finx
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