March 24th, 2015 by Tom Minney
“How do we become relevant to society again?” This is the challenge posed to world’s securities exchanges this morning by Ashish Chauhan, CEO of BSE India securities exchange. He told the World Exchanges Congress in London this morning (Tue) that stock exchanges that concentrate only on trading for the sake of trading are in a zero-sum game.
They should look to add value in areas where there will be gains. He sees the gains will be huge for proactive securities exchanges: “In next 20 years we will create more wealth than in last 10,000 years – will the exchange industry participate in that”.
Chauhan points out that India has 1 in 6 of world’s population but only 2% of its land mass, there are more people than Europe and USA combined and 50% of population are under 25 years old. The challenge is to create jobs and to provide the skills for employment. Exchanges should ask if that will be done by private equity and other channels, or will the exchanges be able to play a major part?
BSE India’s response is to set up BSE SME Platform. Its website “offers an entrepreneur and investor friendly environment, which enables the listing of SMEs from the unorganized sector scattered throughout India, into a regulated and organized sector.”
Chauhan says that going forward technology will change the world and India with its young population skilled in technology will be driving that change. How does each exchange solve the problems of the society it is operating in?
Europe’s integrated capital solutions to big issues
Earlier Cees Vermaas, in his first engagement as CEO of CME Europe, spoke of his vision of Europe in 2030. A centralized market and Europe-wide clearing and settlement will allow relentless pursuit of efficiency and falling costs. London will remain the financial centre, but smart networks will allow other specialist centres to grow all over Europe. This will include more exchange centres to provide funding for SMEs and for infrastructure. Exchange-linked investment into all forms of energy and will support transitions into new and efficient forms of green energy. European bond markets are only 30% of USA volumes at present but in coming years that will change fast with less fragmented bankruptcy regulatory frameworks
October 15th, 2011 by Tom Minney
The securities exchanges of the “BRICS” emerging market bloc have announced a joint initiative to expose investors to the dynamic economies of the bloc members, Brazil, Russia, India, China and South Africa. China and India are among the fastest-growing major economies over the next five years, according to forecasts, and all are increasingly attractive to investors worried about stagnation on US, European and other major exchanges. The initiative was announced on 12 October, during the 51st AGM of the World Federation of Exchanges (WFE), held in Johannesburg.
The stock exchanges will start by cross-listing benchmark equity index derivatives on the boards of each of the other alliance members. Following that, the alliance will develop innovative products to track the BRICS exchanges.
This brings together Brazil’s BM&F BOVESPA stock exchange, MICEX from Russia (currently merging with RTS Exchange), Hong Kong Exchanges and Clearing Limited (HKEx) as the initial representative of China, and South Africa’s JSE Ltd (the Johannesburg Stock Exchange). The National Stock Exchange of India (NSE) and the BSE Ltd (formerly known as Bombay Stock Exchange) have signed letters of support and will join the alliance after finalizing outstanding requirements.
The seven stock exchanges represent a combined listed market capitalization of US$ 9.02 trillion (source WFE and RTS website) with listed 9,481 companies2, equity-market trading value of US$ 422 billion per month and over 18% of all exchange-listed derivative contracts traded by volume worldwide (source Futures Industry Association) as of June 2011.
Ronald Arculli, chairman of HKEx and of the WFE, says in a press statement: “Global investors are increasingly seeking exposure to leading developing markets. The close relationship of the BRICS stock exchanges is behind this initiative, through which investors worldwide will gain easier access to benchmark equity index derivatives, which will now be offered in local currency on these exchanges. These cross-listings are planned to take place by June 2012.”
He adds that this is an important moment in the history of developing countries: “The alliance enables more investors to gain exposure to the BRICS bloc of emerging economies, with its increasing economic power. From a global perspective this alliance points to the growing relevance of the BRICS economies and financial markets in the coming decade and further underlines the reason for the BRICS relationship.”
Russell Loubser, CEO of the JSE, says: “As well as being barometers of market performance, indices also form the basis of other tradeable products, including exchange-traded funds. As a logical second phase in the alliance, the exchanges have agreed to work together to develop new products for cross-listing on the respective exchanges.” These products would combine exposures to equity indices of all alliance partner exchanges. Edemir Pinto, CEO of BM&F BOVESPA, explains: “These products would then be cross-listed and traded in local currencies. They will also allow investors to gain exposure to other emerging markets through a locally listed product.”
A third phase may include product development and cooperation in additional asset classes and services.
Madhu Kannan, CEO of BSE Ltd, says: “The BRICS exchanges alliance holds great promise, as it will create avenues for Indian investors to diversify and expand into other emerging markets. It will also provide unique opportunities to investors in other BRICS nations to participate and contribute in India’s growth. BSE will actively work towards bringing world-class products to India as well as developing new products for other BRICS markets.”
Investors worldwide and those whose homes are in the BRICS economies are increasingly interested in investing in high growth emerging economies. Most of the BRICS countries are predicted to have above-average economic growth. They are going through shifts in that there is rising consumer power generated by a growing middle classes in each, which will accelerate demand.
August 26th, 2011 by Tom Minney
Fund-raising for sub-Saharan African private equity funds was $1.056 billion in January to June 2011, down 5% from $1.11 bn in the first half of 2010. This includes the success of African manager Helios Investment Partners, who announced in June they had raised $900 million for Helios II fund. Total SSA fund-raising in 2010 was $1.5 bn, according to latest figures from the Emerging Markets Private Equity Association (www.empea.net). From market information, African Capital Markets News hears some Africa-focused funds struggled to raise capital.
However, there is a strong move into emerging markets private equity funds as managers hunt for returns, and as emerging markets investors turn to private equity. Total fund-raising for emerging markets funds for the first half of 2011 was $22.6 bn, according to EMPEA, more than double the activity of the first half of 2010. The level of fund raising for the first half is the highest since 2008, when $29 bn was raised in the first half for emerging markets funds.
In the first half of this year, 70% of funds were raised for China, India and Brazil, compared to 50% share in 2010, and $10.3 bn was raised for China funds, 45% of all capital raised. Yuan-denominated funds (56% by number of the Chinese funds) drew participation from Chinese investors including government agencies and contributed 40% of the capital raised. Brazil has two billion-dollar-plus funds that closed on $3bn in the first half and two more are raising $3bn in the current quarter. Some capital into 11 Latin American funds came from local institutions, including pension funds.
Sarah Alexander, President and CEO of EMPEA, said in a press announcement: “Western institutions are continuing to seek greater exposure to the world’s fastest-growing markets, and institutions in the emerging markets themselves are significantly ramping up their investment in the asset class. Fundraising activity in the first six months of 2011 reached almost full-year 2010 levels, and we estimate that fundraising for the full year could reach US$40 bn or more, which would exceed the 2006 total.
“Institutions such as pension funds realize they have to increase their exposure to alternative investments to yield the returns needed to meet their escalating liabilities over the next 5-10 years. Given the drubbing to their equities and fixed-income portfolios this summer, we anticipate even greater interest from institutional investors in private equity in emerging markets.”
The pace of funds making investments into private equity transactions is relatively steady. According to EMPEA, there were 431 deals valued at $14.1 bn in the 6 months to June, compared with 434 deals valued at $12.8 bn during the same period in 2010, and 856 investments totaling $28.8 bn across emerging markets in 2010. China and India together captured 68% of the total invested and 54% of the transactions. A total of $5.8 bn was invested into 136 China deals, accounting for 41% of the total in the first half (up from 19% in 2008) and $3.8 bn into 142 Indian deals.
In sub-Saharan Africa a total of 18 equity investments totaling $256m were completed during the first half of 2011, down from 25 transactions (totaling $186m) in the first half of 2010 and a full total of 48 transactions totaling $631m for the full year. EMPEA says that although activity is concentrated in larger and more mature private equity markets, investments took place across 54 countries in the first six months of 2011, including more nascent markets such as Honduras, Laos, Madagascar, Mongolia and Uruguay.