LUSE sees investor confidence boost after election outcome

The Lusaka Securities Exchange (LUSE) says the outcome of the presidential election could trigger renewed investor confidence and increase activity on the local capital market.

LUSE Chief Executive Officer Nicholas Kabaso says investors who had been holding back while awaiting the election outcome are now expected to begin exploring opportunities on the market.

Mr. Kabaso said the development could also encourage more companies that had been considering listing on the exchange to advance their plans.

“We see it as a mark of confidence that will come through from the investors, because most of those that were sitting on the sidelines will now look for opportunities for them to enter into the market.”

Mr. Kabaso said activity on the market had been subdued over the past six months, largely because investors were waiting for clarity on the political and economic environment following the elections.

“If you have to look at the performance of the market in the last six months, we have obviously carried the narrative that there's been not so much activity on the market, primarily because investors have been waiting to see the outcome of the elections,” he said.

He said market liquidity had also remained constrained, with LUSE recording more sellers than buyers.

“We have actually been carrying the report that we are in a net seller's position, and that's also part of the reason why we have seen that the prices have been quite compressed,” Mr. Kabaso said.

He added that the market had recorded a negative year-to-date all-share index, which he attributed largely to the lack of buyers.

According to Mr. Kabaso, the election outcome could now provide an opportunity to reverse that trend by restoring confidence among both local and international investors.

“We're very excited from our perspective as a market, because that potential now gives us a very good narrative where we can then be able to say Zambia is ready and open for business,” he said.

He said increased investor confidence could also encourage companies that had previously been reluctant to list to consider raising capital through the exchange.

Mr. Kabaso, however, said maintaining investor confidence over the next five years would require consistency in economic policy and stronger measures to stimulate participation in the capital market.

“We need to see more aggression,” he said.

He noted that Zambia had made progress over the past five years in aligning its macroeconomic fundamentals and expressed optimism that the government would maintain consistency between fiscal and monetary policy.

“For the next five years, we are very optimistic that we'll keep up that particular narrative of us aligning the fiscal policy as well as monetary policy,” Mr. Kabaso said.

He called for greater government support for small and medium-sized enterprises (SMEs), particularly through tax incentives for businesses seeking to raise capital on the exchange.

“We have time and again advocated; can you give incentive to our small businesses such as SMEs? Give them tax relief for the time that they are raising capital on our market,” he said.

Mr. Kabaso said such incentives could encourage more businesses to list, while allowing them to access capital needed for expansion without facing an additional tax burden.

“For us, that remains our call to the government. In the next five years, can we then be able to incentivize companies listing money on their exchange? And one way in which we can do that is try to give them some tax relief,” he said.

He said the benefits would extend beyond individual companies, as increased listings would allow capital to flow into productive sectors while giving more Zambians an opportunity to participate in the economy.

“The multiplier effect around that is quite huge. One, you're allowing capital to flow to productive sectors. Then secondly, you're also allowing Zambians to be able to participate in the entire value chain of the economy,” Mr. Kabaso said.

He also urged the government to use public policy to encourage large companies and institutions of public significance to list on LUSE.

Mr. Kabaso said the exchange was particularly interested in seeing large banks and companies that have grown significantly open up their ownership to ordinary Zambians through the capital market.

“We want to see them come to the market, not just because of declaration, but we want them to get to have an opportunity for you and I to be able to start owning stake in some of these entities that are of public significance,” he said.

He further called for the restructuring and improved management of state-owned enterprises, suggesting that listing some of them on the exchange could enhance accountability and allow greater public participation.

“One way in which they can properly be managed is if they become public and they come to the exchange, and then we let more investors participate in their business,” Mr. Kabaso said.

He said LUSE would continue engaging policymakers on measures aimed at deepening Zambia's capital market and increasing public participation in key sectors of the economy.

“These are some of the topical conversations we will still continue to have with our policymakers,” Mr. Kabaso said, expressing hope for “more aggressive uptake” of the exchange's proposals over the next five years.

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