Archive for the 'Listing' Category

Small African stock exchanges are likely to stay small

The Economist magazine says most African stock exchanges are small and likely to stay that way. It says few smaller, family-owned businesses, are keen to list on African stock exchanges and that liquidity or secondary trading is an “even bigger challenge” with few African exchanges achieving turnover (share value traded) of even 10% of market capitalization (the value of shares listed).

The magazine cites a recent paper by economists from Erasmus University, Rotterdam, and City University, London. They investigate 59 nascent stock exchanges around the world. They find that exchanges which start small, with few listings and low turnover, tend to remain so. The best chance for success comes from strong banks and growing savings, meaning that many African exchanges might need to wait until their economies grow.

Source: The Economist with figures from World Federation of Exchanges

Several African exchanges are big enough to move forward, including Johannesburg Stock Exchange with nearly $1 trn in market capitalization, Nigeria Stock Exchange and Kenya’s Nairobi Securities Exchange. The article also points to the successful regionalization project that is the Bourse Régionale des Valeurs Mobilières (BRVM), headquartered in Côte d’Ivoire and bringing together 8 national markets to create more investors and more listed stocks.

The article was written after the author attended last month’s 2016 African Securities Exchanges Association conference in Rwanda and watching the brokers in scarlet jackets at the trading board of the Rwanda Stock Exchange in Kigali. It says most African exchanges were created in the 1990s to help with the sale or privatization of state-owned enterprises. Many of these have been turned from loss making drains into high profit giants, driving economies, creating jobs and making investors including local institutions richer.

On the Uganda Securities Exchange, 7 out of 8 domestic listings are from privatizations, and many other exchanges tell the same story. Botswana’s national telco was the BSE’s biggest IPO when it came to market successfully this year. Others are forcing companies to list, for instance telecom companies and mining companies are key targets and listing can be forced through respective licensing of other regulations. Tanzania has reportedly ordered 8 telcos, including 3 offshoots of international companies, to float 28% of shares and MTN is likely to list on the Nigerian bourse in a deal with the telecoms regulator.

Meanwhile private equity continues to flourish in Africa. There could be a positive spin-off in terms of private equity funds using stock exchanges as exits to sell on to new funds and through IPOs. The article does not touch on one of the most interesting trends, the rise of African institutional investors and the effect they could have on capital markets development.

For the original Economist article, read here.

Ethos Capital PE lists after R1.8bn oversubscribed private placement

Private equity company Ethos Capital, based in Mauritius, listed on South Africa’s JSE on 5 August after R1.8 billion ($131 million) oversubscribed private placement for institutional investors. The listing is a unique combination of a liquid listed share which invests into a diversified pool of unlisted private equity investments. It is aimed particularly at institutional investors, including pension funds.
Ethos had placed 180m A ordinary shares at R10.00 each. Rand Merchant Bank was the financial advisor, sole global coordinator, bookrunner and JSE sponsor. The first trade on Friday was at R10.26, pushing market capitalization up to R1.85bn.
The new fund starts as a cash shell and will invest into a portfolio of unlisted investments with Ethos Private Equity, sub-Saharan Africa’s largest private equity firm, acting as the new company’s fund manager and advisor.
Stuart MacKenzie, CEO of Ethos Private Equity, said in a press release: “Growth is a central principle of Ethos Private Equity’s strategy: value is added by actively transforming the strategy, operations and finances of investee businesses, striving to make them best-in-class. Through pioneering thought leadership, creativity and innovation, Ethos Private Equity has developed a long track record of sustainable investor returns.”
Peter Hayward-Butt, CEO at Ethos Capital, said: “We look forward to investing alongside Ethos Private Equity into high-potential businesses, supporting economic growth and job creation in the long term whilst simultaneously delivering value to our shareholders.”
Ethos Private Equity has a 32-year history and has invested in 104 acquisitions of which 91 have been realized, delivering investment returns with a gross realised internal rate of return (IRR) of 37.4%.

Stuart Mackenzie, CEO Ethos Private Equity

Stuart Mackenzie, CEO Ethos Private Equity

Ethos Capital is expected to invest into:
• Primary investments into various funds to be raised and managed by Ethos Private Equity. EPE is reported to be planning to fund raise for Ethos VII fund by early 2017, targeting R8bn-R10bn with 25% for investments in sub-Saharan Africa outside South Africa. Ethos Capital is to commit up to R2.5bn. There is also plans for: a R2.5bn-R3bn Ethos Mid Market Fund I targeting deals of between R100m-R350m which will be majority black-owned and chaired by Sonja de Bruyn Sebotsa, according to Financial Mail, and Ethos Mezzanine Fund I which aims to raise R1.5bn and will be run by a team which formerly operated as Mezzanine Partners.
• Secondary investments by buying interests owned by limited partners (LPs) in existing Ethos funds. This could include up to $600m invested into Ethos VI fund which closed at $800m in 2013 (against a $750m target), according to Private Equity Africa website.
• Direct investments into investee companies alongside Ethos funds
• Temporary investments including a portfolio of low-risk, liquid debt instruments such as South African government bonds and similar instruments, managed by Ashburton Fund Managers.
According to the prospectus, Ethos Capital investors will be charged a management fee of 1.5% of invested net asset value and 0.25% on cash balances. The investors are offered 20% exposure to growth, subject to a 10% hurdle.
Previously Brait, another leading South African private equity company, had listed its portfolio.
Mackenzie says South Africa does not have enough investments in alternative assets such as private equity, according to the Financial Mail, which reports they make up barely 2% of pension fund assets compared with 20% in many developed markets. The listed vehicle will enable funds to share in the outperformance of private equity but will mean they do not have to stay invested for the full fund life, often 10 years.
The report adds that Mackenzie promises investors will not be subjected to a double layer of fees and that Ethos Fund III and IV outperformed listed markets by more than 5% but Fund V, invested in the years before the financial crisis, underperformed listed markets by 2.4%.
A report by RisCura and the SA Venture Capital Association (Savca) shows that private equity in South Africa has generally outperformed the total comparative return of investment of the JSE’s all share and SWIX indices, returning an internal rate of return of 18.5 percent. Over the same period, EPE returned 20.9 percent on realised investments.
Key investors in the private placing reportedly included fund manager giants such as Coronation and Stanlib and emerging managers such as Mergence and Sentio.

Korea Exchange success story with SMEs

This article summarizes a talk by Honghee Shin, Executive Director of Korea Exchange, at the World Exchanges Congress in March 2016, which highlighted the KRX experience and lessons to be learned.
Building an exchange environment for small and medium-size enterprises and hi-tech companies to raise capital on a securities exchange requires strategic coordination and support by many different government agencies. The Korean Exchange (KRX) has grown to be the world’s third biggest stock exchange for listing and trading SMEs by creating a virtuous cycle in each stage of growth generates cash-flows which in turn fuel other stages.

The original Korea Stock Exchange was set up in 1956 and KRX evolved in 2005 to offer comprehensive front-to-end services. It has KSD (depository) as a 70% owned-subsidiary and also owns 76% of >koscom, a technology subsidiary. It offers a full range of products, trading and market data, as well as the central counterparty (CCP) and it is a self-regulatory organization performing its own market surveillance.

In 2015, KRX had 1,961 listed companies, 8th highest in the world, and traded $1,929 billion of securities, achieving the 10th highest level globally, according to World Federation of Exchanges. The main board is called KOSPI market and it has a futures and options market that was rated 12th in the world.

koreaSMEs160719_diagramvirtuouscycle

It has two boards for SMEs:
• KOSDAQ was launched in 1996, and provides funds for well-established SMEs and “technology-savvy” area including information technology (IT), bio technology (BT) and cultural technology (CT).
• KONEX was launched in 2013 exclusively for SMEs and start-up companies to support their early-stage financing and development through the capital market.

The ratio of market capitalization compared to GDP is higher at KOSDAQ in Korea than any other major SME markets in Asia. In global terms it ranks third among world SME markets for market capitalization and daily trading volume and 4th with 1,061 listed companies. Technology has been the main driver of the market – IT, BT and CT companies made up 68% of the market in 2015, up from 63% in 2005. In particular, biotech has grown its share 4 times and forms 17% of the total market.

KONEX had 24 companies in the third quarter of 2013, but increased that 5 times to 128 listed companies by the end of 2015. Market capitalization is up 8x, and daily average trading value is up 4x over the period. It offers a fast-track “ladder system” which 14 companies have scaled to transfer from KONEX to KOSDAQ.

Much of the success of the exchange can be attributed to the coordinated efforts of Government, the exchange and other stakeholders.

koreaSMEs160719_diagramstakeholders

Key supports from Government include:
1. Tax incentives
– Corporate tax exemption for investing in newly-listed shares(within 2 years)
2. De-regulation for M&A
– Between KONEX and unlisted stocks
– Relieving corporate governance structure
– Waiver of obligation on appointment of external director and full-time auditor
3. Eased accounting standard application
– Exemption of K-IFRS accounting standard.

Concessions offered by KRX are:
1. Relaxation of Listing Requirements
– Lightened listing requirements for corporations with 20% of total investment from angel investors and venture capital
2. Modified disclosure obligation
– Reduction of timely-disclosure
– Exemption of quarter and semi-annual reports
– Mitigation of obligation to submit registration of securities
3. Minimum deposit requirement for investors adjusted from $300,000 to $100,000.

The exchange brings together companies from diversified industries, with a convergence of the high-tech companies that are the driving force of the economy. There is a solid investor base, including active retail investors with ample liquidity, and the exchange offers them a new way to find investment opportunities. The KRX itself offers relaxed listing requirements and less disclosure and maintenance costs. Government offers supportive policies towards gradual de-regulation as well as tax incentives and benefits.

The 2 Korean boards, KOSDAQ and KONEX play a critical role in a virtuous circle of growth and investment. Typically venture capital (VC), angel investors and government (through policies as well as funds) invests into start-up companies. These grow to list on KONEX, where professional investors tend to invest in what re now start-up SME companies, and VC investors can take some funds out to re-invest into fresh start-ups. As the company grows further, it can more to KOSDAQ where often non-professional investors may be interested in what have evolved into established SMEs, and the VCs can take more funds to reinvest into the earlier growth stages. The virtuous circle means that each stage adds momentum to the other stages, fuelling further growth – for the diagram see above.

Dar Stock Exchange shares double on first day of listing in hectic trading

Trading has been fast and furious in the shares of Dar es Salaam Stock Exchange PLC, which self-listed at 9am on 12 July. The first day of trading saw the shares listed at TZS 500 each and soaring as high as TZS 1,000 after hitting TZS 800 in the first 20 minutes. They closed at TZS 935. Turnover was 201 deals out of all the 248 deals for the day, according to the DSE daily report and TZS 794.8 million ($363,750) worth of shares were traded (out of TZS 817.9m traded for all counters).
DSE continued scorching up its own trading boards today (13 July), climbing further to TZS 1,100 and then ending at TZS 1,000 in 289 deals (out of 356 total) for a total value traded of TZS 1.1 billion (out of daily traded value of TZS 1.25bn).
Huge interest had already been seen in the initial public offer (IPO) of shares which ran from 16 May and closed on 3 June. Total bids were TZS 35.8 billion ($16.4 million), or 4.8 times the offered amount of TZS 7.5bn ($3.4m). This follows its demutualization in 2015. The Capital Markets and Securities Authority (CMSA) approved that DSE could augment its “green shoe” option from 10% (i.e. TZS 750m) to 35% or TZS 2.6m). That means the DSE raised TZS 10.1m in total.
IPO applications for up to 10,000 shares (TZS 5m) got their application in full, the full 3% allocation was given to staff, and those who applied for more than 10,000 shares received shares pro rata and a refund.
Government is planning pressure to encourage more listings. Speaking at yesterday’s launch, Finance and Planning Minister Philip Mpango said Government would start with encouragement for privatized companies to list, but it could consider a new law and regulations: “If the mutual talks fail, then the Government will push them to offload some of their shares at the DSE” (as reported in Daily News).
Listed companies that were previous privatizations such as Tanzania Breweries, Tanzania Cigarette Company, National Microfinance Bank, CRDB Bank, Simba Cement, Twiga Cement and TOL Gases are among Tanzania’s 15 largest taxpayers and rated as top-quality employers. Mpango said listing would encourage transparency and good corporate governance, making tax administration easier while enabling citizens to participate in economic activities.

Minister of Finance and Planning Philip Mpango (source rai.co.tz)

Minister of Finance and Planning Philip Mpango (source rai.co.tz)


DSE CEO Moremi Marwa said more than 400 state-owned enterprises (SOEs) had been privatised in the last 20 years, but only 7 listed on the bourse: “It is advisable that future privatizations are conducted through the capital market.”
Nasama Massinda, CEO of CMSA, said they were very pleased by Government’s move to force telecom companies to list 25% of shares at the DSE. “We believe this is the right thing as we want Tanzanians to own shares of these companies… the trend is that some of the firms are allocating shares to one or two ‘mwananchi’. We want them to sell their shares to the public. And the good thing is that these shares are not given for free since local investors would buy them.” She added that the Mining Act also requires that mining firms with special mining licences should sell part of their shares to citizens through DSE.

Investors who want to buy or sell shares can contact the DSE stockbrokers (licensed dealing members) or trade on the DSE’s mobile phone trading platform by dialling *150*36# and selecting “DSE Shares” from the list.

daressalaamse_new logoJan2016

BRVM securities exchange strategy dialogue with US frontier funds

New York, May 12: Sixteen new listings, spurred by privatizations and private equity fund exits, are a key target for Africa’s top-performing securities exchange. The Bourse Régionale des Valeurs Mobilières (BRVM), headquartered in Abidjan, Côte d’Ivoire, is among the world’s most successful integrated regional exchanges, linking eight West African countries (Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo).

In New York this week, 30 US frontier investors, stockbrokers and market specialists joined Mr. Edoh Kossi Amenounve, CEO of BRVM, in a strategic dialogue. Suggestions from the Americans included lower stockbroker commissions, more listings, liquidity, and stepping up listed company reporting to international financial reporting standards (IFRS).

The BRVM has 36 listed bonds and 39 listed companies, and expects four new listings in 2016, following initial public offers (IPOs). In 2015, the BRVM Composite Index rose by 17.77% making it Africa’s top-performing equity index to foreign investors.

Amenounve says: “Most of the economies are not badly affected by the oil price. They are growing through regional linkages. We saw 6.6% GDP growth in our markets in 2015 and expect 7.2% this year. BRVM is different from other markets as our currency, the CFA franc, is pegged to the value of the euro. We offer yield, without the high volatility seen in other African markets.”

The value of trading on the BRVM exchange rose 48% in 2015. Amenounve says local participation is growing even faster: “More and more citizens are becoming shareholders, which is the best way for our people to take ownership of our growth drivers and means of production. In 2012 foreign investors made up 55% of the trading, but the local share had risen to 75% by 2015, of much bigger trading volumes. In 2011, domestic collective investment schemes managed XOF 30bn of assets, but by the end of 2015 that was XOF 600bn, a 20-fold increase.”

Amenounve is leading plans to integrate five West African markets – Nigeria, Ghana, BRVM, Cape Verde and Sierra Leone – by 2020 to form Africa’s second biggest exchange after Johannesburg, with 273 listed companies and 233 brokerage firms. He has been Chairman of the West African Capital Markets Integration Council (WACMIC) since March 2015 and explained the three-step plan for integration:
* Phase 1 is sponsored access for brokerage firms, which was launched in July 2015 and has seen several transactions between Ghana and Nigeria.
* Phase 2 will be a “common passport”, giving a regional stockbroker direct access to any market.
* Phase 3 will be to follow the Euronext model, with a single trading platform and a single order book for all the markets.

The BRVM is Africa’s sixth securities exchange by market capitalization ($12.8 billion for equities and $2.7 billion debt) in 2015. It represents an economic area of more than 100 million consumers, with fast, diversified growth. See more at: www.brvm.org.

The meeting was organized by AZ Media in New York and ourselves, African Growth Partners Ltd.

Edoh Kossi Amenounve, CEO of BRVM exchange

Edoh Kossi Amenounve, CEO of BRVM exchange

Africa set for $3.1bn boom in IPOs

Law firm Baker & McKenzie forecasts that African initial public offers (IPOs) of shares will raise over $3.1 billion in 2016 with 15 IPOs in the pipeline. The firm says in a press release that Egypt, Nigeria and South Africa are likely to be the busiest exchanges, despite the commodity price headwinds, and that Africa’s fourth exchange for IPOs is.. London.

The 15 IPOs in the pipeline are set to beat the total raised in 2015 by 21 African IPOs by $1.5bn, nearly doubling the total raised that year and more than raised for the while period 2011 to 2013. The last time initial share offers raised this much capital was 2010, when $4.4bn was raised.

Deals include:
• Tanzania’s Dar es Salaam Stock Exchange plans to self-list this year
• Botswana Telecommunications Corporations Limited is Botswana’s biggest IPO so far and closed on 4 March
• Egypt has been building up a backlog of delayed deals and many could come to market in coming months, including retail, financial services and food sectors. The Government is also rumoured to be preparing the first privatizations of state owned enterprises since the programme was stopped in 2011, after a boom 2004-2006 when privatizations helped annual economic growth of 7%. One example could be state-owned United Bank of Egypt, a lender with assets of $3.6bn.
• Nigeria’s pipeline looks reasonable for later in the year in the tech, telco and transport sectors
• South Africa will see 2 or more deals, after 9 IPOs in 2015
• Mauritius continues to act as Africa’s offshore financial centre, equity offerings include rights issues and private placements as well as IPOs
• Rwanda predicts 3 IPOs this year
• Blueline is a west African train project which aims to list in Paris, promoted by French tycoon Vincent Bolloré
• Markets are watching with keen interest the progress by the East African Securities Exchange Association seeking to fast-track integration of their markets, which may unlock demand among issuers while increasing liquidity.

Most active sectors for last 5 years were power, real estate, financial services and healthcare. As the markets broaden, there is growing interest in consumer staples and technology, as the growing middle class demand more sophisticated services.

Koen Vanhaerents, Baker & McKenzie’s Global Head of Capital Markets, commented: “These are challenging economic times for those of Africa’s economies dependent on commodities for much of their income, while so-called “hot money” flows out of emerging market funds investing in Africa. So it is positive to see steady progress in Africa’s equity capital markets, with a strong pipeline so early in 2016 and potentially larger deals than we’ve seen for some time.”

baker+mackenziegraphics160307_IPOs

London remains the key global financial centre for Africa. Edward Bibko, head of B&M EMEA Capital Markets Practice, said: “There’s enormous pent up demand among issuers to conduct capital raisings, particularly in Egypt, which is showing strong growth and the emergence of a larger middle class. The wider continent still faces challenges and there is little local institutional investment or retail demand other than in the biggest economies. This means larger companies have to dual-list in a global financial centre like London, as well as their home market, to avoid volatility driven by the fact that skittish international investors make up the majority of market activity.” As mentioned earlier, Interswitch plans the first $1bn tech listing, probably a dual listing in London and the Nigerian Stock Exchange, although this may be delayed until early 2017. Mauritius headquarters Essar Energy raised $1.9bn, the largest sum ever by an African company when it listed in London in 2010.

Other equity deals include:
• Real estate fund Tadvest’s dual-listing in Mauritius and Namibia
• Mauritian retailer Compagnie des Magasins Populaires’ recently announced $4 million rights issue
• Atlantic Leaf Properties’ $70m private placement of equity listed on Stock Exchange of Mauritius.

This video broadcast on 7 March on CNBC features Wildu du Plessis, Partner at Baker & McKenzie, with some interesting ideas and very useful regional breakdowns.

Rwanda Stock Exchange expects 3 share offers (IPOs)

Rwanda Stock Exchange

Rwanda Stock Exchange, credit New Times.

Rwanda Stock Exchange, credit New Times.


The Rwanda Stock Exchange is expecting 3 initial public offers IPOs of shares in the coming months, which will bring the total number of equities listed for trading to 10. No details were disclosed, but the East African newspaper reports the 3 are among the most profitable in their sectors. Pierre Celestin Rwabukumba, bourse CEO, told Bloomberg: “We expect three initial public offerings this year. Due to disclosure restrictions I cannot tell you which ones.”
The East African’s Kabona Esiara wrote: “They are a bank where a principal investor is liquidating interests in order to venture into other businesses and a transport company that is seeking to fund acquisition of a modern fleet. A third company involved in logistics is looking for expansion capital. The latter two are classified as small and medium enterprises (SMEs).” The IPOs are said to be at an advanced stage, with the prospectuses going through Capital Markets Authority checks before roadshows in Burundi, Kenya, Rwanda, Tanzania and Uganda begin.”
Davis Gatharaa, managing director at Baraka Capital was reported saying: “2016 should witness increased market capitalisation, liquidity and turnover largely driven by new listings. We believe the Rwanda Stock Exchange offers a bargain hunting ground for foreign investors helped by a very strong dollar.”
IPOs on the RSE previously were Crystal Telecom (owns 20% of MTN Rwandacell) in July 2015, Bank of Kigali in 2014 and beverages firm (brewer) Bralirwa in 2011, launching the equity market. I&M Bank had issued a corporate bond in 2008. RSE statistics showed RWF34 billion ($45.5 million) in trading from January to November 2015. Market capitalization was RWF2.82 trillion ($3.75bn).
The market saw declines with the Rwanda Share Index down 21% but the All Share Index was down 3.9%. and the paper reports that analysts do not expect strong performance this year. Robert Mathu, CEO of the Capital Market Authority regulator, was reported saying: “Weak global commodity prices weakened the economic outlook for most of sub-Saharan Africa. Coupled with the currency bleeding that was experienced by most of these African countries, this led investors to adopt a wait-and-see approach on African stockmarket prices.”
When the bourse was launched the Capital Market Advisory Council said in 2011 that government planned to offer shares in 6 companies on the domestic exchange, including Commercial Bank of Rwanda, now known as I&M Bank Rwanda, and Sonarwa Insurance. The New Times newspaper reported in April 2015 the government is planning an initial public offering of its 19.8% stake in the Rwandan unit of Nairobi-based I&M Holdings Ltd.
In a report on AFKInsider Rwakumba said the bourse is targeting new retail investors: “ We are focusing a lot on the demand side with specific attention on retail investors. We are increasingly getting more and more new investors; in 2015 we had a surge of new investors of 19.2%. We are to keep building on this momentum to entice new investment so that we don’t face challenges in supply and demand sides.”

Mwalimu Bank shares soar as Dar es Salaam enterprise market gains momentum

The market for small and medium size businesses is picking up momentum on the Dar es
Salaam Stock Exchange. Mwalimu Commercial Bank Plc was the fourth listing on the Enterprise Growth Market segment on 27 November, and Prime Minister Majaliwa Kassim Majaliwa spoke at the listing. The share launched at TZS500 ($0.23) after its initial public offer (IPO) and then soared by 40% to TZS700 on the first day of trading before gradually falling back to TZS665.

The IPO also registered a success for the mobile phone trading platform launched by the DSE in August 2015. DSE Chief Executive Officer Mr Moremi Marwa told Daily News that at the end of September, a month after the launch, some 700 investors used mobile phone trading. The paper says that because of the mobile platform, upcountry buyers outpaced Dar es Salaam residents in buying shares in the Mwalimu Bank IPO. It is good step forward for financial inclusion in Tanzania. The IPO was oversubscribed by 24%.

DSE CEO Moremi Marwa, (photo credit 24Tanzania)

DSE CEO Moremi Marwa, (photo credit 24Tanzania)

Previous EGM listings were Mkombozi Commercial Bank (December 2014), Swala Gas and Oil (August 2014, local exploration subsidiary of Australian Swala Energy), and Maendeleo Bank (November 2013). There are four registered nominated advisers to help companies apply to the EGM for listing and to sponsor their listing and compliance, employing a model based on London Stock Exchange’s Alternative Investment Market (AIM).

The EGM was launched in 2013 as part of a successful project backed by the Financial Sector Deepening Trust (FSDT).

The name of Mwalimu bank means “teacher” in Swahili and was also the affectionate honorific title for Tanzania’s founding President Julius Nyerere. The bank is supported by the Tanzania Teachers Union, which has 200,000 members according to this DSE press release.

It has not yet opened its doors as it needed a banking licence approval and to raise capital, before it can establish systems and procure core banking and other systems. CEO Ronald Manongi was reported in The Citizen newspaper saying it will start offering services in May 2016 with a branch at Samora Avenue in central Dar es Salaam and later at Mlimani City. It has a capital base of TZS31 billion.

Nigerian Stock Exchange signs links to London SE Group

Paternoster Square with London Stock Exchange at right (credit: Wikipedia)

Paternoster Square with London Stock Exchange at right (credit: Wikipedia)

The Nigerian Stock Exchange (NSE) this week (18 Nov) signed a capital markets agreement with the London Stock Exchange Group (LSEG) to support African companies seeking dual listings in London and Lagos. It follows implementation earlier in 2014 of a new settlement process between the UK and Nigeria which significantly boosts the efficiency of listing and trading of ordinary shares of Nigerian companies listed in London and those of UK companies on the Nigerian market.
A top LSEG executive said it shows the global investment community is rushing to be part of the Nigerian story.
The agreement was signed by Oscar Onyema, CEO of the NSE, and Nikhil Rathi, Head of International Development, LSEG. Also present was Sir Roger Gifford, Country Head for the European Bank SEB, former Lord Mayor of London, and Co-Chairman of the UK Government’s Nigeria Emerging Capital Markets Task Force and Nigerian co-chair Aigboje Aig-Imoukhede, President of NSE.
Gifford said, according to the press release: “This is exactly the sort of ambitious project the ECMT Nigeria was launched to support. Nigeria is without doubt one of the most promising opportunities for capital markets development worldwide.
“An effective, transparent and well-governed capital market – across all asset classes – has the capacity to catalyse a nation’s quest for growth and development. In particular, functioning markets for corporate equity and debt reduce the dependence on bank capital and make investment securities available to a broader range of investors: institutional, private and international. This agreement will build on existing strong commercial and economic ties between the UK and Nigeria to our mutual benefit. ”
Mot of the previous dual-listings have listed on London’s AIM market although the milestone April dual-listing of Seplat (see below) saw Seplat head for the main market.
Onyema said: “Today’s agreement is another major step towards our goal of ensuring that all companies that have substantial operations in Nigeria are accessible to both Nigerian and international investors. In addition, we will be ensuring that our leading companies achieve the global profile and international institutional investment they deserve.”
The 9 Nigerian or Nigeria-focussed companies quoted on LSE have a collective market capitalisation of $14.2bn and include 6 oil & gas explorers and 3 major Nigerian banks.
The press release also quoted Rathi: “The agreement signed today is a reflection of the global investment community’s strong desire to be a part of the Nigeria story. As the world’s most international exchange, LSEG looks forward to building on the success of existing dual listings in Nigeria and London and partnering with the NSE to showcase the rapid developments in Nigerian capital markets and the Nigerian economy.”

Seplat dual-listing helping Nigeria bourse towards N1 trillion

Indigenous oil company Seplat was the first to make use of the linkages in April, when it raised $500 million in an Initial Public Offer (IPO) on both exchanges. Euromoney reported it was the first dual-listing and largest IPO from southern Africa since Dangote Cement in 2010. The London end was advised by BNP Paribas, Standard Bank, Citi and RBC Capital Markets, the Nigerian listing by Renaissance Securities and Stanbic IBTC.

The IPO added N28 billion ($161m) to the NSE market capitalization. The bourse aims to reach N1 trillion ($5.7 billion) by 2016 with oil and gas firms a key target.

Euromoney quoted Dolapo Oni, energy research analyst at Ecobank: “To list on the main board in London, Seplat required international accounting standards and the highest levels of corporate governance and transparency, which it has aimed for from its inception in 2009. Many other Nigerian companies are still not comfortable with disclosing this much information to the public and thus are not good enough to list on the main board.”

Miguel Azevedo, head of investment banking Africa at Citi, added: “It also represents the return of the sector to the London market, which hasn’t had a significant oil and gas listing since the financial crisis. Seplat really creates a new benchmark for international companies coming to the market.”

UK pushes emerging capital markets

UK Chancellor George Osborne announced the Emerging Capital Markets Taskforce on 9 April. It aims to unlock new opportunities for the UK financial services sector by helping to open and deepen capital markets in emerging economies through innovative collaboration between Government and private sector. This is part of the strategic public-private sector Financial Services Trade and Investment Board (FSTIB) launched in 2013 and chaired by HM Treasury. More details can be found via the FTSIB website.

London Stock Exchange offering to Africa

According to the London Stock Exchange, the listings of companies focussed on sub-Saharan Africa total 115 companies:
• 26 companies on the Main Market
• 3 Global Depository Receipt (GDR) listings on the Main Market
• 2 GDR listings on the Professional Securities Market (PSM)
• 84 companies quoted on AIM, the growth market
The LSE headquarters are in London and it has significant operations in Italy, France, North America and Sri Lanka and employs approximately 2,800 people.

londonstockexchange_logo
In its press release about a link-up with the Nigerian Stock Exchange, the London bourse says it offers partner securities exchanges and investors a broad range of international equity, bond and derivatives markets, including London Stock Exchange; Borsa Italiana; MTS, Europe’s leading fixed-income market; and the pan-European equities platform, Turquoise. Through its markets, the Group offers international business, and investors, unrivalled access to Europe’s capital markets.
Increasingly important are the post-trade and risk-management services including CC&G, the Rome headquartered central counterparty clearing house (CCP) and Monte Titoli, the significant European settlement business, selected as a first wave participant in the T2S (TARGET2-Securities) European settlement engine that aims to offer centralized delivery-versus-payment. The Group is also a majority owner of LCH.Clearnet, the leading multi-asset global CCP.
LSEG offers its customers an extensive range of real-time and reference data products, including SEDOL, UnaVista, Proquote and RNS. It owns FTSE which calculates thousands of unique indices that measure and benchmark markets and asset classes in more than 80 countries around the world. African exchanges have recently been taking strong interest in FTSE products that will help their visibility and data flows.
By purchasing Sri Lanka’s MillenniumIT trading, surveillance and post trade technology some years ago, the LSEG established itself as a leading developer of high performance trading platforms and capital markets software. According to the LSE press release over 40 other organizations and exchanges around the world use the Group’s technology, although smaller African such as the Dar es Salaam Stock Exchange are switching to other systems as reported on this blog, as Millennium IT’s focus changes.