Archive for the 'Integration' Category
July 15th, 2010 by Tom Minney
From when trading started at 10am last Sunday, 11 July, NASDAQ Dubai (www.nasdaqdubai.com) is routing all trades in its listed equities through the trading platform of Dubai Financial Market (DFM – www.dfm.ae). NASDAQ Dubai is one of the leading exchanges contesting the crown of financial centre of the Middle East and North Africa, and also has potential for channeling investments into African countries.
Trading for the first few sessions this week was reported to have gone well and several brokers were said to be inquiring about membership.
NASDAQ Dubai describes itself as: “the international financial exchange serving the region between Western Europe and East Asia. It welcomes regional as well as global issuers that seek regional and international investment. The exchange currently lists shares, derivatives, exchange-traded commodities, structured products, Sukuk (Islamic bonds) and conventional bonds.”
The move has been prepared since last December, and is part of a consolidation between the exchanges and aiming to boost liquidity on NASDAQ Dubai. Essa Kazim, Managing Director and Chief Executive Officer of DFM, said in a press release: “Cooperation between the two exchanges will increase, driving the expansion of Dubai as a centre of capital markets dynamism and innovation. Today’s outsourcing is a major step for us and the region. Through these growing links, DFM gains a wider array of product offerings and international expertise, while NASDAQ Dubai benefits from DFM’s high liquidity and enormous base of over 552,000 investors.”
Clearing, settlement and custody functions for NASDAQ Dubai equities also migrated to DFM’s systems on 11 July under an outsourcing agreement. Jeff Singer, Chief Executive of NASDAQ Dubai, said: “This new structure brings together more than half a million individual investors on DFM with NASDAQ Dubai’s institutional investors, many of them based outside the region. It positions Dubai as a leading international capital markets hub, providing investors with excellent liquidity and issuers with a choice of regulatory frameworks.”
In May 2010 DFM acquired two thirds of the shares of NASDAQ Dubai through an acquisition of shares from Borse Dubai and NASDAQ OMX, the international exchange group. Borse Dubai still owns one third of the shares. NASDAQ Dubai remains a separate exchange regulated to international standards by Dubai Financial Services Authority (DFSA), which gave approval for the outsourcing last week. DFM is regulated by the United Arab Emirates’ Securities and Commodities Authority. NASDAQ Dubai remains a separate company inside the Dubai International Financial Centre (DIFC). It retains its own legal framework, listing rules and Members.
DFM and NASDAQ Dubai equities are now displayed together on the DFM website www.dfm.ae. NASDAQ Dubai equities also continue to be displayed separately on the NASDAQ Dubai website www.nasdaqdubai.com. Brokers who are members of NASDAQ Dubai access the DFM trading platform either directly, or through NASDAQ Dubai’s Market Place Services function, or through another broker.
Under the outsourcing, NASDAQ Dubai’s equities remain listed on NASDAQ Dubai and are not listed on DFM. Trading of equity derivatives continues to take place on NASDAQ Dubai’s own trading platform and systems.
NASDAQ Dubai’s opening hours are now 10am to 2pm UAE time (6am to 10am GMT) Sunday –Thursday. These are also DFM’s opening hours. Previously, NASDAQ Dubai’s opening hours were 10am to 5pm UAE time (6am to 1pm GMT) Sunday-Thursday.
June 9th, 2010 by Tom Minney
Rwanda’s Capital Markets Advisory Council (www.cmac.org.rw) expects 4 more Kenyan cross-listings this year on the Rwanda Over The Counter market, which is run by CMAC, bringing the total to 5, according to a report in The New Times newspaper (www.newtimes.co.rw).
Robert Mathu, the Executive Director of CMAC, is reported as saying that the Nation Media Group (www.nationmedia.com) has made a formal approach and mentioned it in their annual report, and the CMAC also expects interest from Equity Bank, Kenokobil and TPS Serena. The companies are already doing business in Rwanda and elsewhere in Eastern Africa.
He is reported as saying: “This means a lot for the Rwandan market as it gets more products and increases the capital markets standards of trading as well as the infrastructure to make it easy for investors to invest.”
The companies also plan to cross list on other regional markets as the East African markets move to much closer integration. Mr Mathu said that cross listing is not about raising new capital and the companies will offer 100% of their shares to Rwandan investors at the trading prices on the Nairobi Stock Exchange (www.nse.co.ke).
The first cross-listing is Kenya Commercial Bank. The big step for this year would be teh first local Initial Public Offering for brewery BRALIRWA, covered on this blog in February.
April 1st, 2010 by Tom Minney
Fears of the potential impact of IT disruption on African capital markets, combined with a long-running initiative to pool fragmented markets for more liquidity, led to a shock decision by the African markets association today to switch to a single African market platform at short notice.
The pioneering African Securities Markets Association market body says that all markets should be closed by 12 noon today(Thursday), while trading on the new platform is expected to start with effect from 9am on 6 April, giving traders and market institutions a very busy long weekend to set up alternative infrastructure.
“The main aim of the new system, called FITS, is to ensure that we can go on trading shares, bonds and other securities despite any possible terrorist attacks or power cuts”, said Bernani Madofo, IT spokesperson for ASMA, said in a news release: “At the same time, we are taking the chance to combine all markets in one trading pool, and at a stroke eliminating the small and fragmented markets that have been harming efficiency and capital raising in our great continent”.
The new system will revolve around a return to floor trading in a single African location. All securities, including bonds, shares and derivatives, will be listed on electronic screens, and traders will set up offices nearby before heading down to the trading floor. Traditional trading systems including verbal and physical transactions, backed up by prompt data entry, have frequently been shown in leading research studies to be more effective for trading, turnover and market pricing efficiency than expensive computer systems. Broker Japie Enroni said of his former trading screen “It’s like watching paint dry, I’d love some action”.
After hurried debate, in a shock electronic ballot the ASMA membership voted to set up the new exchange in the International Conference Centre, Seychelles are now busy setting up offices in IT enabled locations such as Club Meditrade and five star hotel Le Bigroller, while working around the clock to gearing backoffices for settlement and clearing using the revolutionary Fun In The Sun (FITS) integrated “umbrella” client and trade settlement system using L-ounger software.
Extra liquidity is likely to be gained after trading hours as Africa’s tens of thousands of stockbrokers gather in local hostelries to prepare their throats for the next day’s trading action.
March 16th, 2010 by Tom Minney
Sunil Benimadhu, Chief Executive Officer of the Stock Exchange of Mauritius:
We have had lots of discussion on how to link different markets. Lots of work has been done from a technical standpoint. We will keep national exchanges as they stand and enable their members to reach the members of different exchanges. Technically it is possible, now we need to raise the financing and also to be clear that the investment will need to make sense in terms of flows from increased traffic.
In order to get more liquidity, we need to increase the free float, currently many companies have requirement of 20% free float but even that may not be available for trading, for instance controlling shareholder may still sit on a big shareholding and keep it from trading.
March 5th, 2010 by Tom Minney
Imara Holdings Ltd (www.imaraholdings.com), an investment banking and asset management group with operations in 10 countries mostly in southern Africa, aims to expand in Zimbabwe, according to Zimbabwe’s Herald newspaper. It is currently listed on the Venture Capital Market board of the Botswana Stock Exchange (www.bse.co.bw) and the Herald reports that it wants to buy the rest of the shares in Zimbabwe’s Imara Capital Zimbabwe (Pvt.) Ltd (www.imaracapital.com), which it owns 32%, and also to dual list on the Zimbabwe Stock Exchange (www.zse.co.zw).
The report says that Imara Holdings has proposed a share deal in which local shareholders and the management will get a shareholding in the parent in return for their shares in the local company. The dual-listing on the bigger exchange could make the shares more liquid and the dollar-based ZSE is attractive to international investors. Imara management reportedly refused to comment, possibly while the transaction is under approval by authorities.
Imara Holdings website does not mention the transaction, although it has been publishing cautionary announcements since 31 July 2009. It describes the group as “medium sized”. It has offices in Botswana, Malawi, South Africa and the UK, and associate offices in Malawi and Zimbabwe as well as working relationships with Stockbrokers Zambia, Namibia Equity Brokers and Mac Capital in Dubai.
According to the Holdings website: “We are independent and privately owned, enabling objective decision-making in the service of our clients. We are active participants in the region’s financial markets and maintain one of the largest research coverage of regional equities. Funds under management exceed US$ 135m and funds under administration exceed US$750m.”
Imara group services fall into three primary operating areas:
• Corporate Finance & Advisory Services
• Institutional and Private Client Asset Management
• Securities Trading
Imara Capital is one of the associates listed in Zimbabwe, others being listed on the website as Imara Edwards Securities (Pvt) Ltd, Imara Asset Management Zimbabwe (Pvt) Ltd and Imara Corporate Finance Zimbabwe (Pvt) Ltd. The Herald report says these are wholly owned by Imara Capital.
On 8 January Imara signed a licence agreement to become the 7th member of Global Alliance Partners (www.globalalliancepartners.com), of which Mac Capital Dubai is already a member. Bernard Pouliot, chairman of GAP and of the Quam Group based in Hong Kong, said Imara joins the alliance at a very opportune time when Chinese interest in Africa is growing: “Imara is good for the alliance and for China. Alongside other members of GAP, we are committed to hit the ground running when an umbrella investment scheme by African countries is developed and eventually implemented.”
The other GAP members are Quam Financial Services Group for Hong Kong and China, Capital Partners Securities for Japan, KT ZMICO for Thailand, Thanh Cong Securities Company for Vietnam, and Westminster of Hudson Securities in USA.
In December, Imara Holdings announced it had recently acquired a majority equity stake in the Botswana stockbroking company Capital Securities (Pty) Ltd., one of 4 licensed stockbrokers on the Botswana Stock Exchange, established in March 1999.
“Shareholders are advised that negotiations relating to a further regional acquisition, which was announced in a Cautionary Announcement published on 31 July 2009 and in subsequent renewal announcements, are still ongoing. Shareholders are therefore urged to continue to exercise caution in their dealings in Imara securities,” says the Botswana announcement published in December.
February 21st, 2010 by Tom Minney
According to Zimbabwe’s Herald newspaper (www.herald.co.zw), it is only months before the introduction of a hub-and-spoke interconnectivity model for SADC stock exchanges as “the first significant step towards the integration of one of Africa’s economic regions”.
According to reports, stockbrokers have sought a vehicle to provide information on companies operating in the region, monitor their performance and explore opportunities for clients. Geoff Rothschild, Director: Government and International Affairs at South Africa’s JSE Ltd (www.jse.co.za) and outgoing chair of the Committee of Southern Africa Development Community Stock Exchanges (COSSE), grouping 10 southern African bourses, is quoted as saying the system would “expose our neighbours’ business organisations to local and international investors. This hub will allow exchanges to connect to each other’s platforms and ultimately allow investors to trade on all SADC exchanges through their local brokerage.”
Major investment is needed to upgrade technology for the region’s exchanges and, although many are willing, financing is still being sought. The hub-and-spoke model is being developed by the Mauritius securities market, including the Central Depository and Settlement company, which has experience of capital markets development in other parts of Africa.
Zimbabwe Stock Exchange Chief Executive Emmanuel Munyukwi has been elected chair for the next 2 years. Lusaka Stock Exchange chief executive Mrs Beatrice Kansa is deputy chair. Mr Munyukwi, a former banker, is quoted as saying: “The position will help to put Zimbabwe back on the regional securities map and also enhance the visibility of ZSE to investors.”
CoSSE was established in 1997 and meets quarterly, its members with established exchanges are: South Africa, Namibia, Botswana, Mauritius, Mozambique, Swaziland, Tanzania, Malawi, Zambia and Zimbabwe. Its objectives include increased co-operation and links in operations, communications, regulations, technical skills development and other areas between the stock exchanges and to make SADC securities markets more attractive to local and international investors.
February 21st, 2010 by Tom Minney
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.
February 10th, 2010 by Tom Minney
There are several initiatives underway to link Africa’s exchanges, chiefly to make them more economically efficient through achieving better liquidity and thus becoming more responsive and attractive to investors. Talks have been continuing for over 15 years, but recently several starts have been made.
One promising initiative is the Africa Board, offering leading African companies the chance to have a dual listing on South Africa’s JSE Ltd. (www.jse.co.za), Africa’s leading securities market, with good trading,clearing and settlement systems. The aim is that the shares would be traded on both the JSE and the home market. However, so far Namibia’s Trustco is the only listing, although talks continue with top listed companied in several African countries and with stock exchanges, regulators and other stakeholders.
Other initiatives to achieve more liquidity, many of which can develop in parallel and most of which should be encouraged, include a hub-and-spoke technology link-up being developed by the Committee of SADC Stock Exchanges and international broker link-ups through stockbrokers such as Auerbach Grayson (www.agco.com), Exotix (www.exotix.co.uk) and Securities Africa (www.securitiesafrica.com).
African Capital Markets News recently visited Johannesburg. We print an EXCLUSIVE email interview with Geoff Musekiwa (Business Development Manager, Africa Desk of the JSE Ltd.) on 2010 prospects for Africa’s securities exchanges.
ACMN: What are your strategic priorities for 2010?
GM: We will be cementing and building on the relationships that we created with all stakeholders in 2009, continuing with the outreach so that there is greater awareness of the Africa Board. Ultimately we expect the traction to culminate in a number of listings on the JSE Africa Board.
ACMN: What developments do you expect on Africa’s securities exchanges in 2010, including in terms of regional integration?
GM: 2009 was a very trying year for most exchanges from a return perspective, with the fortunes of most exchanges only turning towards the end of the year. One hopes that this year there will be renewed confidence in those markets in line with developments in global markets. There have been various initiatives towards integration, notably in East Africa, SADC and West Africa. The extent of progress will obviously differ across the regions and our expectation is that discussions will continue until member constituents find common ground.
ACMN: How is technology affecting the progress of the Africa Board and the African exchanges? What are the significant developments?
GM: There is a move from the exchanges that are still paper-based, to make their trading electronic so that they can make cross-border trading for dual-listed stocks easier and possibly in readiness for eventual integration. International investors also need a certain level of comfort in the systems they utilize to trade and automation is definitely a key requirement. As part of the JSE Africa (ex-SA) strategy, stock exchanges can utilize the existing JSE platform by linking their systems for trading, clearing and settlement. Thus far, only Namibia has taken up this offer.
ACMN: Initially some exchanges claimed the Africa Board would take liquidity, reducing it even further for African exchanges. What is your response? Do you think that stakeholders and exchanges are starting to change their views?
GM: The key objective of the JSE Africa Board was to assist in the development of the other exchanges on the continent. We have looked empirically at the benefits of dual listings particularly regarding liquidity in the home exchange in the long term. When some JSE issuers sought dual listings in London in the 90s, there was a similar outcry from the local stakeholders. In fact the reverse occurred – as the companies increased their pool of investors and accessed more capital they began to have an increased interest from investors, greater following from analysts and were able to transform themselves into truly international companies without losing their identity. The downstream benefit, in addition to increased volumes on the JSE, was an increase in interest not only on those companies but in SA as an investment destination. This is what we would like to achieve through dual inward listings onto the Africa Board. The increase in liquidity of stocks trading on the Africa Board will be the most persuasive argument to the stakeholders that may still doubt the motives of the Africa Board
ACMN: Any details you can give of listings planned or other developments?
GM: It would be premature to give details of expected listings before the announcements are made but stakeholders will be kept abreast of developments at the appropriate times.
ACMN: How is the interest from institutions and brokers? Which stockbrokers can buy and sell on the Africa Board?
GM: Interest in Africa as an investment destination has grown over the years, mainly because of its perceived low correlation with developed markets. Consequently there has been a proliferation of Africa Funds with a distinct mandate to invest on the continent. But there remain a few challenges (some perceived and some real) that hinder the successful and efficient execution of trades including but not limited to liquidity, different regulations and logistical challenges. Brokers and fund managers are naturally excited about the Africa Board because it offers them an opportunity to trade African assets on a platform that they are fairly comfortable with, so we are in effect bringing the rest of Africa to their doorstep. The benefit for the other exchanges will come through over time, as the standard of the Africa Board constituent issuers will demystify any notions that investors may have on African capital markets.
The brokers that can buy and sell on the Africa Board are those that are members of the JSE. Trading can either be done directly through the JSE members, or through brokers in the home country, who will in turn instruct the JSE member. In order to take advantage of the opportunities that the Africa Board offers, it is important that the brokers on the continent foster cross-border execution relationships with each other, thus creating mutual economic benefits for the brokers.
ACMN: What’s the 2010 outlook for African exchanges?
GM: As global markets recover, there are increasing indications that portfolio flows into Africa are beginning to tick upwards. One hopes this will trigger a renewed interest in listed securities and also provide the necessary capital to allow issuers to resuscitate plans that they had shelved amidst the crisis. We stand ready as the JSE Africa Board to assist issuers to achieve these objectives.
December 19th, 2009 by Tom Minney
It has been very difficult to get any news out of the African Stock Exchanges Association (www.africansea.org) conference in Abuja 2009 (Dec 2-4). As far as we can tell, no press releases were put out and neither ASEA secretariat nor the press liaison people from the Nigerian Stock Exchange have been replying to emails.
The following news extracts have been put together from a range of media sources:
West African Exchanges to integrate
Three West African stock exchanges signed an agreement to integrate their markets and to introduce common listing and trading rules, according to a joint statement issued at the ASEA conference. The bourses are Ghana SE, Nigeria SE and the Bourse Regionale des Valeurs Mobilieres, which serves Benin, Burkina Faso, Guinea Bissua, Ivory Coast, Mali, Niger, Senegal and Togo.
Ekow Afedzie, deputy managing director of the Ghana Stock Exchange, reportedly said they had agreed that stockbrokers who meet “certain standards” will acquire a “common passport” that will qualify them to trade on any of the exchanges in the region. Listing and trading rules will be harmonized and legislation will be changed where necessary to pave the way for the integration.
African Index
ASEA plans to create an African stock index in 2010, according to the GSE’s Afedzie. He reportedly said ten countries, including Ghana, Nigeria, Mauritius and Kenya, have signed up to participate. FTSE will compute the index and no decision has yet been taken on which companies will constitute it.
According to Bloomberg, African stock exchanges rank among the worst performers in 2009, although the MSCI Emerging-Markets Index surged 74%. Ghana’s All-Share Index lost 48%, more than any other of 90 primary indexes tracked by Bloomberg. The Nigerian Stock Exchange’s All-Share index is the second-worst performer, declining 36%, while Kenya’s Nairobi All-Share index is sixth-lowest, dropping 5.5%.
Integration and better regulation the answers
Integration of the 28 ASEA stock exchanges to make cross-listing and Africa wide issues easier will assist in capital raising and wooing back foreign investors who pulled out of Africa at the onset of the global crisis. Product diversification could be another tool to boost market liquidity.
Nigeria’s Vice President Goodluck Jonathan reportedly told the conference: “The timing of the crisis has given African capital markets the opportunity to learn from the mistakes of the more advanced markets in the developed world.” He urged the markets to work together to seek “protection from the consequences of the greed and regulatory failure in the more advanced markets”.
He said the crisis offers opportunities to players in African markets who are alert and able to adapt quickly to the changing environment. But he warned that market innovations must be based on economic fundamentals, warning that any irrational exuberance would always come back to haunt nations. Market development and growth must be inclusive and not limited to a select few people and the crisis has clearly demonstrated the critical role of the state in the financial intermediation process and in the maintenance of financial stability through appropriate regulation and supervision.
Acting Director-General of Nigeria’s Securities and Exchange Commission Daisy Ekineh called for retooling and re-orientation for market regulators and operators in the light of the several challenges facing them: “Such challenges as the shallowness of the market and the relatively unsophisticated investing African populace that is vulnerable to misguided investment advice and other malpractices must be addressed.”
Director-General of the Nigerian Stock Exchange Ndi Okereke-Onyiuke urged African Heads of State to make it mandatory for all African countries to establish commodities exchanges through which they can develop their commodities markets.
Zimbabwe Stock Exchange chief executive Mr Emmanuel Munyukwi was reported in local media as saying: “One thing that clearly came out was that there is still appetite for African markets and deliberations were centred on what we should do as the continent to sustain foreign investments.” He said the conference noted tight controls were one of the major impediments to the inflows of foreign funds on African markets.
Delegates examined the challenges faced by African securities exchanges in entrenching strong corporate governance, which was agreed to be more important than financial issues. The participants opted for regulations or compliance of upholding corporate governance ethics, in preference of self-regulation. A representative of the International Finance Corporation reportedly cited the Brazilian Stock Exchange as an example and urged African stock exchanges to adopt similar stringent listing requirements, disclosure mechanisms and high corporate governance standards. While disclosure and transparency were needed, the quality of information published was critical.
Pension funds could boost the growth of African markets and they could have a wider remit to invest in private equity and infrastructure. The size of pension funds could be increased through penetration into the informal sector, which enhances the contributory rate of pension funds.
December 17th, 2009 by Tom Minney
The curriculum of the Securities Industry Training Institute (SITI) has been launched in Kampala, Uganda. Its establishment in September and development have been funded by International Finance Corporation, the private sector investment arm of the World Bank, as part of its Efficient Securities Markets Institutional Development programme (www.ifc.org).
SITI aims to standardize training on a wide range of programmes on capital markets and investments, corporate finance, asset management, entrepreneurship, corporate governance and other related fields of study. Eventually, all brokers, fund managers and investment advisors will require certificates to operate.
Simon Rutega, CEO of the Uganda Securities Exchange (www.use.or.ug), launched the institute and says it will serve the East Africa trading market that is gradually being integrated. He is Chairman of the Board of SITI East Africa and other members are reportedly Rose Mambo (CDSC Kenya), Jonathan Njau (chief executive of the Dar-es-Salaam Stock Exchange), Robert Mathu (executive director of the Rwanda Capital Market Advisory Council) and Peter Mwangi (chief executive of the Nairobi Stock Exchange).
Future training programmes include training for board members of USE in February, and training for the media. Rutega reportedly said: “The intention is to have as many people trained as possible. The point there is also the integrity and standardization of the market.”
The institutions – Uganda, Nairobi and Dar es Salaam securities exchanges and Rwanda’s Capital Markets Authority agreed a standardized curriculum which will be administered by SITI.
According to Rwanda’s New Times newspaper, CMAC Operations Manager Celeste Rwabukumba says all practitioners will be required to have training by SITI to learn the rules and regulations of the industry: “This is a good development which will give market actors the understanding of the regional market, experience, how the business operates as well as the harmonization of the regional stock markets.” Rwanda has seven registered stock brokers companies which focus mainly on corporate finance, stock brokerage and advisory services among others.
According to the report, only Tanzania in the region has a certification programme.