African Capital Markets News » Central Depository

East African investors opening accounts at Nairobi Stock Exchange

Tom Minney — Wed, 04 Jan 2012 11:41:29 +0000

Although the number of investors from other East African countries opening trading accounts at Kenya’s Nairobi Stock Exchange (www.nse.co.ke) is still very small, it is growing more consistently in the last 2 years than other categories of investors. According to data to 30 Sept released by Kenya’s Capital Market Authority (www.cma.or.ke), East African individual investors opened 97 securities accounts at Kenya’s Central Depository and Settlement Corporation (www.cdsckenya.com). This compares to 92 accounts opened in the full year 2010 and 79 in 2009.
By comparison Kenyan individual investors only opened 27,669 accounts in the 9 months to September 2011, compared to 120,756 accounts opened in 2010 and 52,836 in 2009. Kenyan equity trading has remained subdued as investors say high interest rates make them choose government debt securities over equities.
One potential reason for the East African interest, according to an article in the East African , is that Ugandans are opening trading accounts at the NSE in anticipation of the IPO of electricity distributor Umeme (www.umeme.co.ug) scheduled for 2012. Umeme is expected to cross-list at the NSE and the Ugandan Securities Exchange (www.use.or.ug). Some investors open multiple accounts ahead of a potentially “hot” initial public offering (IPO) of shares, where they hope to sell their initial allocation quickly and make a quick profit, as this is likely to maximise their share of allocation if the IPO is oversubscribed.
Trading experience shows that cross-listed East African shares such as Centum, Kenya Airways, Jubilee Insurance, trade more on the NSE compared with the Dar es Salaam Stock Exchange (www.dse.co.tz) and USE. The increased liquidity in Nairobi means that East Africans are better off having a trading account at the NSE. The paper comments that Rwandans, Tanzanians and Ugandans are probably realising this fact and also taking positions ahead of the listing of some of their firms on the NSE by opening more CDS accounts in Nairobi: “Investors will go the extra mile to open and operate, as proxies, CDS accounts in the names of their relatives or friends who know nothing on trading in shares. Expect an influx of Rwandese, Tanzanians and Ugandans at the NSE in 2012.”

Bank of Kigali IPO lifts Rwanda Stock Exchange: 52% gain on first day

Tom Minney — Mon, 05 Sep 2011 16:15:12 +0000

Interest in share offers is high in Rwanda, after shares of Bank of Kigali (BK) rose 52% to RWF190 in their first day of trading on 1 September. The Initial Public Offer (IPO), which opened on 30 June and ran for a month, offered the shares at RWF125. According to today’s market report (5 September) total trading today was 5 deals in BK shares which ended at RWF172 (it closed on Friday at RWF 191) and in brewer BRALIRWA which was unchanged at RWF246.
The BK shares offered included a sale by the Government of its 20% stake and the bank offered a further 25%, making a total offer of 300.3 million shares for a total value of RWF37.5 billion ($63.6 m). This was 274% oversubscribed with Rwandan investors making up 75% of the shareholding. The retail investors’ pool was oversubscribed by 291%, institutional investors from Rwanda 165%, institutional investors from the region 221%, international investors 330% and BK employees and management 135%, according to a report in the East African newspaper.
The bank plans to use the IPO funds to expand its network including opening 44 branches in 2011, increase the loan portfolio and consolidate its leadership position in the increasingly competitive banking industry. The listing should also boost activity on the young RSE, Africa’s newest stock exchange which was launched on 31 January
Lado Gurgenidze, chairman of the BK board, is reported in New Times newspaper saying: “The transaction and new capital comes at the right time when the bank is focusing on building a great bank and retaining the leading position in the market. Through great service and 45% of the shares being in the hands of the public, we have all the reasons to be optimistic that it will be very liquid on the secondary market.”

Investors waitng for more offers
It is the fourth listing on the RSE. When it launched in January it immediately started trading the shares of the first domestic IPO, brewer Brasseries et Limonaderies du Rwanda BRALIRWA (www.bralirwa.com). This had been offered at RWF136 and started trading at RWF220. The other two counters are cross-listings from Kenya: Kenya Commercial Bank and Nation Media Group.
Reuters reports that appetite for shares is likely to be strong, partly because of the favourable pricing. The BK shares were offered at a multiple of 1.4x book value, a 15% discount to Kenyan banks at the time of the sale. The article quotes Nkoregamba Mwebesa, managing director of CFC Stanbic Financial Services in Kenya, saying: “Being a government exit, the Government is able to offer a discount which will attract (investors). We should continue to see appetite for all that. Rwanda is also stable politically, and that encourages investors as well. When the Government is exiting they don’t care about dilution. They are not out to really make money. The agency reports that market players said the main aim of the government was to help kick-start the bourse.
Future share offerings are likely to attract sustained interest, including government plans to sell a 20% share in the country’s biggest insurer Sonarwa (Societe Nouvelle d’Assurance du Rwanda – Nigeria’s IGI owns 35%). It is also hoping to sell shares in what Reuters called “an unidentified cement firm”, although earlier this year Ciments du Rwanda Ltd was mentioned.
Government has also held talks about selling its 10% stake in telecom operator MTN Rwanda. MTN Group is majority shareholder and has the right of first refusal on any share sales. John Rwangombwa, Minister of Finance and Economic Planning, reportedly said earlier this year: “We have two options; if MTN gives us (Government) the price we want, we will sell the shares to them directly while the other option is through an IPO depending on the other investor.” (as reported on this website)
The Minister had also said that Government would sell more of its stake in BK later. It owned 66.3% before the offer.

T+2 settlement here, electronic trading “by June”
On 3 August the RSE announced that it was adopting a T+2 settlement cycle for all securities with effect from 5 August. Sellers of securities receive money and transfer of ownership is effected on the third day. This replaced T+5 for equities and T+3 for bonds. The new system was made possible after the Central Bank of Rwanda (BNR) introduced a modern payment system, the Rwanda Integrated Payment and Processing System (RIPPS), which offers real-time gross settlement (RTGS), an automated clearing house (ACH), an automated transfer system (ATS) and a central securities depository (CSD).
Reuters reported that the next step would be electronic trading and other steps to attract more stock and debt issues. Robert Mathu, chief executive of Rwanda Stock Exchange, was reported as saying: “We are hoping to put in place an electronic trading platform by June next year.”

Electronic trading and central securities depository coming for Zimbabwe?

Tom Minney — Sun, 04 Sep 2011 14:00:40 +0000

A company has been engaged to supervise the transition of the Zimbabwe Stock Exchange to electronic trading. A document on the change has been presented to Cabinet and issues around setting up a Central Securities Depository including the shareholding structure. According to a report in the Government’s Herald newspaper, Finance Minister Tendai Biti told a breakfast meeting organized by the Securities and Exchange Commission of Zimbabwe and the ZSE that the CSD could be in place by year-end.
The aim is to improve stakeholder relations and explore possibility for other capital or financial markets to be set up. Minister Biti said the CSD was a critical part of a modern capital market system as it reduced the payment cycle, enhanced transparency and helped monitor the shareholding thresholds of foreign investors participating on ZSE.
He said that the CSD would help prevent irregularities. Apparently the minister said that currently only about 20 investors accounted for most of the trading in the 79 listed counters. He claimed that the CSD will improve liquidity, promote market integrity and transparency while minimising market manipulation, fraud and financial crime.
According to a report in a South African newspaper called “Sunday Times Zimbabwe”, the Minister would also like to modernize the ZSE Act and the Securities Act and possibly introduce a “super regulator”, similar to the UK’s Financial Services Authority (in June 2010 the UK Government announced plans to abolish the FSA and split its functions). This report claims that 20 of the “shadowy players” were virtually controlled by the same individuals, and Renaissance Financial Holdings Limited was accused of wrongdoing because of insufficient measures to detect insider dealings.
According to the Herald, the Minister said: “The main issue being dealt with is the shareholding structure of this systematically important institution (CSD), which should reflect national ownership by both the public and private sector players.” He said that the National Social Security Authority, the Reserve Bank of Zimbabwe or the ZSE would own at least 51% of the CSD company. Another significant shareholder will be Chengetedzai, a local private firm which is overseeing the establishment of the electronic trading system (the website http://chengetedzai.com/) appears to be just a title page.
The government seeks to demutualise the bourse, which it believes will enhance accountability and speed modernisation. Currently the bourse is still an association of stakeholders while demutualization would mean turning the exchange into a company driven by the profit motive or other goal. Minister Biti said demutualisation was critical to prevent cartels of members from dictating the affairs of the bourse, which created credibility crises and could put off investors. There has long been tension between the ZSE and the SEC over jurisdiction and self-regulation.
ZSE trading is done in daily “call-over” sessions when brokers gather around a table and bid against each other. However, trading is more active than on many more automated neighbouring exchanges.
According to the report, the Minister said: “When you go to the Zimbabwe Stock Exchange and see the way they trade it gives the impression that we are still stuck in 1950. It is as if someone pressed a pause button on the TV and everything stopped. We have to modernise and part of it is coming up with a CSD,” he said.
SECZ chairperson Mrs Willia Bonyongwe said the country wanted to set up more securities and capital markets and challenged innovative Zimbabweans to come forward with proposals. She suggested markets could assist in trading equities, bonds, quasi or hybrid financial instruments, asset securitisation and unitisation, hedging or risk commodity markets and private equity instruments, or even trade in agriculture and mining products. The ZSE is the only active capital market.
In early August the ZSE website (www.zse.co.zw) was hacked twice in early August and used phishing and has currently disappeared.

Egyptian stock exchange delays reopening to 16 Feb

Tom Minney — Mon, 14 Feb 2011 11:29:18 +0000

The Egyptian Exchange (www.egyptse.com) has decided to postpone its reopening until Wednesday 16 February. The stock exchange, based in Cairo, closed on 27 Jan after the main EGX 30 Index fell 16% in a week, and was due to open again yesterday (Sunday 13 Feb). The decision to delay the opening comes on the back of talks with regulators, stockbrokers and the Misr for Central Clearing, Depository and Registry (MCDR, www.mcsd.com.eg).
When the exchange reopens steps are expected to be in place to stop precipitous falls and price fluctuations. Many foreigners had sought to take out money and it is not yet clear how sentiment will shape up following the resignation of former President Hosni Mubarak on 11 Feb and the army take over pending democratic elections scheduled for six months time. The EGX says it is working on technical requirements needed to start trading as well as procedures to be used as soon as the trading begins. Telecommunications and Internet services may also have been disrupted.
The Wall Street Journal reported yesterday (13 Feb) that late yesterday the Central Bank of Egypt (www.cbe.org.eg) said that banks in Egypt will close on Monday and Tuesday due to workers’ strikes and the birth of Prophet Mohammad. Its emailed statement reads: “Amidst the strikes of worker in some authorities, including public banks … the central bank has decided to close banks on Monday Feb. 14 and Tuesday Feb. 15 on the occasion” of Prophet Mohammad’s birth.
Meanwhile schools and universities were reported to be reopening over the past weekend and many industries had said they were back and working close to normal by 7 Feb.

Back the blog – support coverage of ASEA 2010 (bids close 22 October)

Tom Minney — Fri, 15 Oct 2010 10:48:39 +0000

Next month’s upcoming African Stock Exchanges Association conference (10-12 November, Zambia) could be a key event in shaping the future developments of African securities exchanges.
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Please send bids by email to tom.minney[at]afrigrow.com.

Kenya’s central depository aims to expand

Tom Minney — Tue, 28 Sep 2010 21:14:50 +0000

Kenya’s Central Depository and Settlement Corporation (www.cdsckenya.com) continues to expand outside the borders of Kenya, buoyed from its 2008 triumph with the region’s biggest initial public offer, Safaricom. Recently, Business Daily newspaper (www.businessdailyafrica.com) reported that CDSC has submitted a bid to offer consultancy services for setting up an electronic share depository for the Zimbabwe stock market.
According to the report, the CDSC issued a statement on 21 September, that it had submitted a proposal to the Zimbabwe Securities and Exchange Commission “to provide advisory services” in the intended implementation of an electronic share registry similar to the one introduced in Kenya in 2004.
The statement read: “Such services have been previously provided by CDSC to the Uganda Securities Exchange, and discussions are ongoing for the provision of similar services to the capital market in Rwanda.” CDSC also recently won the tender to provide registrar services for the BRALIRWA Initial Public Offering (IPO) in what will be the first local listing and share offer for Rwanda’s over-the-counter securities market.
CDSC is privately owned by the Capital Markets Challenge Fund (50%), Nairobi Stock Exchange (20%), AKS Nominees (18%), Capital Markets Compensation Fund (7%), Uganda Securities Exchange and the Dar-es-Salaam Stock Exchange (2.5% each).
Chief executive officer Rose Mambo denied recent reports which said the CDSC was experiencing financial difficulties. She said it: “..made a profit in 2009 and maintained a strong financial position… 2008 was a good year boosted by high turnover as a result of the Safaricom IPO, so the reports of a slump are inaccurate.”.
CDSC receives a 0.06% commission on all trading done at the Nairobi Stock Exchange, where market turnover was KSh97.52 billion ($1.2 billion) in 2008 against trades of KSh88.17 billion in 2007, boosted mainly by the Safaricom IPO which pumped Sh50 billion worth of shares in to the market and attracted 750,000 individual applicants. Its revenues (turnover) declined after foreign investors reduce their trading at the NSE in the storm of the global economic crisis.
Ms Mambo was reported as saying CDSC’s income from trade commissions in 2009 was KSh38.1 million (US$473,535), a drop from the 2008 turnover of Sh63.6 million. The regional push is meant to increase its sources of revenues after a 2-year slow-down at the NSE reduced earnings from trading commissions, which is the core revenue source for the company.
The newspaper says the NSE had 1.4 million accounts in the Central Depository System (CDS). In addition, the CDSC also acts as a clearing house for market transactions. The system introduced 6 years ago made it possible to transfer and register securities in electronic format without the necessity of physical certificates. This had an immediate impact of increasing number of shares traded at the bourse from 380 million in 2003 to about 5.8 billion in 2008, according to CDSC data. The company also aims to cut operational costs by substituting paper-based statements for text and e-mail statements.
According to the report, Rwanda also has six more listings in the pipeline.

Uganda moves towards immobilization

Tom Minney — Thu, 24 Jun 2010 22:36:33 +0000

The Uganda Securities Exchange (www.use.or.ug) is aiming for a 28 June deadline to finish immobilizing the shares listed for trading, according to a statement issued by the bourse and reported in local media. Companies whose shares are being moved into electronic form include Bank of Baroda, East African Breweries, Equity Bank, Jubilee Holdings, Kenya Airways, National Insurance Corporation and British American Tobacco, reports East African Business Week (www.busiweek.com).
Investors have been gradually moving from holding paper certificates as proof of owning shares in a company to keeping them through electronic records at the Securities Central Depository (see the USE website ). Once a share is held on an electronic register, shareholders cannot use their old share certificates.
The aim is to support automated trading on the USE, which could start as soon as next January. The paper quotes a market analyst as saying: “Liquidity once again will be the issue but this is not likely to impact the market performance in the long run.” However the paper says that the immobilization, which started on 29 April with the immobilization of Stanbic shares, has led to lower trading volumes on the exchange.
The paper quotes the Manager of the Securities Central Depository, Joel Lutamaguzi, as being happy with progress: “The ultimatums have worked. I am thrilled with the response from the public and if we can get this through this process then we will be getting closer to automated trading.”
Investors are opening accounts with the Securities Central Depository Agents (SCDAs), who are mostly broker/dealers and include all the brokerage firms licensed by the Capital Markets Authority and commercial banks.
The Nairobi Stock Exchange (www.nse.co.ke/newsite/) also uses automated trading and a securities depository. Nairobi also reportedly saw lower trade volumes during immobilisation.
The USE has been trading since 2000, and its first listed company was Uganda Clays.
The New Vision newspaper interviews Harriet Kiwanuka, the USE’s research and market development manager. It quotes her as saying: “Immobilisation means shares are pooled into the system and for anybody to trade, you need to get your certificate to the SCDA who will deliver it to the USE for depositing to certify trade. Once a counter is immobilised, you cannot use a paper certificate to trade on the floor. Everything has to be entered into the system for trade to occur.
“We cannot run a parallel system of trading electronically held securities parallel to paper securities because of the risks, and reconciliation challenges involved.
“We are only trading electrically deposited securities. Anybody holding Stanbic, New Vision, DFCU, Uganda Clays and Kenya Commercial Bank certificates has to go to SCDA because these counters have been immobilised.”
She says that there has been a lot of education, but many people will only immobilize their share certificates when they decide to sell and, although there is demand, prices are lower and many sellers are not keen. However, response on immobilization has been satisfactory and she says 300 million shares have been immobilized in 1,400 new accounts. The response is across the board, with account openings by the locals, institutions and foreigners which means education efforts are paying off.
The Nairobi Stock Exchange has already immobilized shares, and faced a similar task of convincing shareholders to act, until the listing of Safaricom. Immobilization and electronic trading are part of moves towards an integrated East African securities market.

Uganda central securities depository went “live”

Tom Minney — Sun, 21 Feb 2010 09:00:45 +0000

The Uganda Securities Exchange (www.use.or.ug) was set to open the Securities Central Depository at the end of last week. The SCD is an electronic system of keeping traded shares records at the stock market in a single location and would end the issuing of paper certificates as evidence of ownership.
According to the Monitor newspaper (www.monitor.co.ug), the SCD was to “go live” on 18 February, quoting Ms Harriet Kiwanuka, the head of trade, research and market development, USE. The move will prepare the USE for electronic trading of shares and is another step towards link-up in the regional markets, including the advanced Nairobi Stock Exchange.
Stockbrokers are set to ask owners of the paper certificates to return them in exchange of electronic transaction accounts, similar to bank accounts.
Ms Kiwanuka is reported as saying both new paper certificates and electronic accounts will be issued until the USE adopts electronic record keeping and trading.
Mr Peter Okoed, the senior portfolio planner at stockbroker Dyer & Blair (www.dyerandblair.com), is reported in Monitor as saying that the SCD will make the exchange attractive to foreign investors who are usually discouraged to invest by the communication that it takes for them to receive their share certificates.
With this system, investors will only trade their shares after getting electronic accounts.

Nigerian Stock Exchange seeks $33 mln for new software and Sierra Leone bourse

Tom Minney — Thu, 12 Nov 2009 16:56:58 +0000

The Nigerian Stock Exchange (NSE – www.nigerianstockexchange.com) on 9 November announced that it is seeking some N5 billion (US$33 million) in capital for its fifth software upgrade and also to help finance the Sierra Leone stock exchange.
NSE Director General Ndi Okereke-Onyiuke reportedly told local media that the exchange’s software has been upgraded four times, with the next in 2010, at a likely cost of 16 mln-20 mln euros ($24 mln-$30 mln). She added that the London Stock Exchange had reportedly spent 30 mln euro on its software, and talks continue on how the LSE could help in Nigeria.
Apparently donors gave grants to Ghana, Kenya, Tanzania and Uganda to upgrade their stockmarkets, but believe that Nigeria is too rich to need this.
The Sierra Leone stock exchange was launched by Sierra Leone President Dr. Ernest Bai Koroma on 17 July 2009, after being inaugurated in 2007. According to Nigerian media, the NSE launched the Sierra Leone exchange free of charge and now seeks financing for electronic trading there. The Sierra Leone exchange is under the wing of the central Bank of Sierra Leone (www.bankofsierraleone-centralbank.org). Okereke-Onyiuke said the NSE assisted Ghana previously and plans to help Liberia open a stock market.
According to other reports, the NSE earlier this year cut its holdings in the Central Securities Clearing System Ltd (www.cscsnigerialtd.com) from 100% to 30%, after a private placement of the shares.
The CSCS is the clearing house and central securities depository of the Nigerian stock market. It includes an integrated central securities depository (CSD) offering clearing (electronic book-entry transfer of shares from seller to buyer) and settlement (payment from buyer to seller) for all NSE transactions. All securities listed for trading on the NSE must have their certificates deposited in CSCS before transactions can take place. The CSCS was incorporated in July 1992 and started operating in April 1997.
She is reported to have told the House of Representatives Committee on Capital Markets: “We had to do this because our shareholders wanted to have better stake in the company, and again it gives room for proper corporate governance and a sense of belonging to all our stakeholders.”