Archive for the 'Stock Exchanges' Category

London Stock Exchange appoints David Schwimmer as CEO

David Schwimmer, CEO of the London Stock Exchange from 1 August.

The London Stock Exchange has appointed 49-year-old David Schwimmer as its new CEO, starting on 1 August. He has been working for investment bank Goldman Sachs for the last 20 years. The news was released in an LSE press release on 13 April.

He replaces Xavier Rolet, who left the LSE in November as part of a governance crisis sparked by 5% shareholder TCI Fund Management. Since then David Warren has run LSE as interim chief executive and he will return to his job as LSE’s chief financial officer.
Schwimmer, based in New York, is the head of Goldman Sachs’ market structure business and metals and mining businesses.

Schwimmer’s career at Goldman Sachs includes: advising exchanges and stockbrokers, working as chief of staff to chief executive, Lloyd Blankfein, when he was the bank’s chief operating officer, jointly running the bank’s business in Russia (2006-2009) and then becoming head of metals and mining in 2011. He returned to advising exchanges in 2017 as he added the role of the head of market structure.

According to the LSE Chairman, Donald Brydon, in the press release: “David is a leader with great experience in the financial market infrastructure sector, which he has been closely involved in throughout his investment banking career, as well as capital markets experience in both developed and emerging markets. He is well known for his robust intellect and partnership approach with clients and colleagues alike.”

A key task will be to manage the Brexit transition, and defend the LSE’s position as the world’s biggest clearing house for derivative transactions against competition from European exchanges, particularly Germany’s Deutsche Börse. LSE controls London Clearing House (LCH), which processes about three-quarters of the €1 trillion-a-day ($1.2trn) clearing market for derivatives, acting as a middleman between buyers and sellers of complex contracts.

He has extensive experience in mergers and acquisitions and will be able to buy new companies in line with LSE strategy. According to the Financial Times Rolet had turned the LSE into a “£15bn ($21bn) European powerhouse via a string of deals”. A merger with Deutsche Börse AG failed in 2017 and there has been speculation that US group Intercontinental Exchange could bid for LSE, although ICE says that one issue is the UK’s future outside Brexit. Chicago Mercantile Exchange has also been described as a potential bidder.

It quotes Bill Brodsky, former chief executive of Cboe Global Markets: “He’s a very articulate, very intelligent, very engaging personality… David has a deep global markets background and is extremely knowledgeable about the industry. He is eminently qualified to lead London Stock Exchange Group.”

The LSE says Schwimmer will be paid £775,000 ($1.1m) plus a bonus opportunity of up to 225% and will receive £1.05m ($1.5m) to make up for not getting his 2018 bonus from the US investment bank, plus other incentives. He is a graduate in English from Yale and with a JD degree from Harvard Law School. His passions are baseball (Mets) and outdoors, according to Bloomberg.

Top learning on the future of African exchanges – BAFM seminar this week 19-20 April

The 7th Building African Financial Markets (BAFM) seminar has a top lineup and tomorrow (17 April) is the last day to register The seminar is part of the annual programme of capital markets development and synergies of the African Securities Exchanges Association and is also backed by the World Federation of Exchanges. It is hosted by Nairobi Securities Exchange, will be on 19-20 April at the Villa Rosa Kempinski Hotel in Nairobi.

Leading the programme will be William Ruto (Deputy President of Kenya), Geoff Odundo (CEO, Nairobi Securities Exchange), Samuel Kimani (Chairman of the Nairobi SE), Oscar Onyema (President of ASEA and CEO of the Nigerian Stock Exchange), Paul Muthaura (CEO of the Capital Markets Authority of Kenya).

Topics are focused on market structures, innovation, new technology and linkages, including top international speakers:

• Adaptive innovation and the blueprint for orderly markets in Africa – Siobhan Cleary (Head of Policy and Research, World Federation of Exchanges) and Stebbings Archie (Principal, Oliver Wyman)
• Building blocks for innovative markets: effective risk management for clearing and settlement, a CCP in a box – Stuart Turner (Founder, Avenir Technology)
• Building new markets in a frontier economy and the impact on indigenized solutions: The Kenyan experience – Terry Adembesa (Director, Derivatives Markets, Nairobi SE)
• Linking African exchanges organically – Selloua Chakri (Managing Director, SCL Advisory)
• Building blocks for innovative markets: A guide for managing cyber risk – Joseph Tegbe (Partner and Head of Technology Advisory at KPMG, Nigeria)
• FinTech as an enabler for sustainable development: An innovation showcase – Panel with moderator Catherine Karita (Executive Director at NIC Securities), Farida Bedwei (Co-Founder and Chief Technical Officer, Logiciel Ltd), David Waithaka (Chief Strategist at Cellulant Kenya), Candice Dott (Head of Market Development and Customer Experience across Africa, Thomson Reuters), Alex Siboe (Head of Digital Financial Services at KCB Bank Kenya) and Julianne Roberts (F3 Life)
• RegTech: Leveraging technology in the effective risk management and regulation of African capital markets – Michele Carlsson (Managing Director, Middle East and Africa, Nasdaq)
• Effective financial education: The role of emerging technology in contemporary Africa – Abimbola Ogunbanjo (Managing Partner, Chris Ogunbanjo & Co.)
• Financial innovations in SME financing: Opportunities for African MSMEs – Sofie Blakstad (CEO, Hiveonline)
• Disruptive technologies reshaping the future of African financial markets: M-Akiba – Irungu Waggema (Head of IT, Nairobi Securities Exchange)
• Impact of EU Regulation on African Capital Markets (EMIR, BMR, MIFID II, GDPR) – Anne Clayton (Head of Public Policy, Johannesburg Stock Exchange)
• Financing sustainable development: Product and market innovations – Anthony Miller (Coordinator at the Sustainable Stock Exchange Initiatives)
• Disruptive technologies: Blockchain – the future of finance or a flash in the pan? – panel with moderator Ade Bajomo (Executive Director, Information Technology and Operations, Access Bank), Reggie Middleton (CEO and Founder of Veritaseum), Abubakar Mayanja (MD of ABL), Adriana Marais (Head of Innovation SAP Africa) and Samuel Maina (Research Scientist at IBM Research Lab Africa)

It’s a key gathering for Africa’s securities exchanges and key learning for all interested in the future of capital markets and their role in African development. For more information and for bookings, rush to this registration link.

BRVM investment open days – 14 March Johannesburg

BRVM in Abidjan (photo Tom Minney African Capital Markets News)

One of the world’s most successful regional stock exchanges, linking eight West African countries with a stable currency and fast growth, will come to South Africa to outline investment opportunities. The Bourse Régionale des Valeurs Mobilières (BRVM), headquartered in investment destination Côte d’Ivoire, will meet South African fund managers and market experts on March 14 at “BRVM Investment Days in Johannesburg”. This exclusive investor forum is part of a global 2018 BRVM roadshow.

Edoh Kossi Amenounve, CEO of the BRVM, will outline strategic developments on the exchange, including: investor-friendly trading and disclosure, working with London and Casablanca stock exchanges to boost growth companies in the region, and a board for mining companies after big discoveries in the region.

Other speakers are:
• Dominic Bruynseels, Regional CEO West Africa for Standard Bank, which sees the potential for growth in the West African Economic and Monetary Union (WAEMU) region and opened its first branch in Côte d’Ivoire in August 2017
• Samira Mensah, Associate Director of Standard & Poor’s Global Ratings, with an overview of banks in the region as well as fixed income and other securities
• Michael Barnes, Head of Sales and Trading at stockbroker African Alliance, one of the leading South African stockbrokers for trading on the BRVM exchange.

The speakers will share insights on the economies – the IMF forecasts growth at 6.5% or 6.6% a year across the region until 2021 – and on sectors, shares and key investment themes. It is a unique opportunity for South African institutions to learn more about the potential of Africa as regional links become stronger.

WAEMU combines eight West African countries with a population of 110 million: Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo. WAEMU shares a single currency, the CFA franc, which is linked to the value of the euro (EUR), and a single central bank and capital markets regulator.

Mr Amenounve says: “South African investors are taking increasing interest in the opportunities in Africa as the world’s long-term growth story. The West African region offers fast, diversified growth and interesting lessons on regional development and economic linkages. In our countries, demographics, development, technology and increasing productivity all offer opportunities and the regulated exchange market offers liquidity and support to investors.”

The BRVM has 45 listed companies and is Africa’s sixth biggest exchange in terms of market capitalization with $12.5 billion in shares listed at end December 2017, plus 32 government and corporate bonds and five sukuk. To register online, please visit www.brvminvestmentdays.org.

Contact person for all event-related questions: Ms. Aziza Albou Traore ceo@azmediaagency.com Tel: +1 646 3772178
For any event-related or media enquiries, please contact: Ms. Glynis Loizeau: glynis@azmediaagency.com Tel: +33-6-83-48-75-85

This event is organized by AZ Media Agency www.azmediaagency.com
Twitter @BRVM_UEMOA #BRVMInvestmentDays

Africa’s top stock exchange performance in 2017

Despite a great year on the main US markets in 2017, many African stock exchanges offered USD investors a higher return. Biggest gain in USD was the Malawi Stock Exchange index, which climbed by 56.0%. It was among 6 African exchanges that outperformed the tech-heavy Nasdaq, which scored a strong 28.2% gain in 2017.
Other leading African stock exchange indices included Ghana, up 43.8%, Uganda up 30.7%, Mauritius 29.9% and South Africa JSE All Share up 29.7%.
The Zimbabwe Stock Exchange Industrial Index climbed 124.2%. However, most analysts rebase the market using the Old Mutual Implied Rate (OMIR), comparing the price of Old Mutual shares listed on the Zimbabwe Stock Exchange with the same shares on the London Stock Exchange to act as an inflation adjustor, since local dollar values do not reflect international dollar values. On the OMIR basis, the ZSE still gained a creditable 28.5%.
Other leading African markets such as Nigeria (Main Board index up 25.4%, but still to gain its previous highs of April 2014 and 2008) and Egypt’s EGX 30 (up 24.1%) also delighted investors.

Source – index data from Bloomberg and stock exchange websites compiled by Securities Africa

Stockbroker Securities Africa (www.securitiesafrica.com) shed light on which of the major counters helped drive 2017 index performance:
• Botswana: Botswana Insurance Holdings Ltd (+14.2%), Barclays Bank of Botswana (+31.1%) and Choppies Enterprises (+9.0%) led the gains in the major names in Botswana.
• BRVM: Whilst Sonatel closed the year 11.29% higher, Ecobank Transnational Inc closed 17.8% lower in USD terms. The currency was also weaker (-10.44%) for the year, contributing to the decline in the USD value of the Index. This was the only Index that closed in negative territory in 2017.
• Egypt: Eastern Tobacco was the stand-out performer, closing the year up 229.3% in 2017.
• Ghana: Standard Chartered Bank was the main driver behind the GSE performance in 2017, gaining 95.7% in USD terms.
• Kenya: Telecom giant Safaricom closed the year 40.2% higher taking responsibility for a large part of the index performance.
• Malawi: Illovo Sugar (+50.4%) and Telekom Networks Malawi (+110.2%) were the two major movers in 2017 in USD.
• Mauritius: Heavyweights MCB Group and SBM Holdings gained 35.5% and 20.5% respectively.
• Morocco: The two banks, Attijariwafa Bank (+28.5%) and Banque Central Populaire (+14.3%) were the big name gainers in Morocco.
• Namibia: Namibia Breweries was the major contributor to the strong local index performance as it gained 55.1%.
• Nigeria: Dangcem (+15.4%), Nestle (+67.7%), Guaranty (+48.2%), Zenith (+55.4%) and Stanbic (+130.9%) contributed to a strong index performance in 2017.
• Rwanda: Bank of Kigali gained 26.7% to help the index close in the positive band.
• S. Africa: Naspers and Glencore led the big name gainers finishing the year 88.8% and 49.3% higher in USD terms.
• Tanzania: Tanzania Breweries and Tanzania Cigarette were the major name strong performers, gaining 20.2% and 52.6% respectively.
• Tunisia: Banque Internationale Arabe de Tunisie closed 31.4% higher and Attijari Bank followed suit, gaining 26.6%.
• Uganda: Stanbic Uganda (+9.9%) and Jubilee Holdings (+17.3%) were the major names that helped the index gain significantly during the period.
• Zambia: Standard Chartered Bank (+58.5%), Zambian Breweries (+13.0%) and Copperbelt Energy (+64.5%) were the major drivers behind the Lusaka Stock Exchanges performance.
• Zimbabwe: Using the Old Mutual Implied rate, the market closed 28.5% higher for 2017. The two major names in Zimbabwe, Delta and Econet, were up 77.8% (17.8% OMIR) and 216.7% (49.7% OMIR) respectively. British American Tobacco which closed the year 136.1% (31.2% OMIR) higher was also one of the best performing names.

Highest ranked African securities exchange websites

Which African stock exchange website gets the most traffic? According to www.Alexa.com, a respected benchmark of web traffic, in rankings today (9 January) the Nigerian Stock Exchange website (www.nse.com.ng) was ranked #83,112 busiest website in the world and #826 website in Nigeria. It has great user engagement, with 3.1 page-views per visitor and each visitor spends an average of 5 minutes 39 seconds on the site.

The next busiest African securities exchanges websites were Egyptian Exchange (www.egx.com.eg, climbing to rank #124,904), South Africa’s JSE (www.jse.co.za, #157,543), on a slow decline since June 2017 but also good user engagement, West Africa’s regional BRVM exchange (www.brvm.org, ranking climbing recently to #219,284) covering eight markets and Nairobi Securities Exchange (www.nse.co.ke) with ranking of #297,989.

(photo credit Nigerian Stock Exchange)

Last month in a press release from the Nigerian bourse Olumide Orojimi, Head, Corporate Communications, NSE, said: “We are delighted to see this increase in traffic to our website as it means that we are making the Nigerian capital market easily accessible to investors who are increasingly residing online.

“At the NSE, we are committed to bridging the information gap between the Exchange and market participants, knowing the high correlation between market information (stock market prices, market data, corporate actions and news) and decision making. We are glad our website is also helping us to achieve this.

The NSE has upgraded its website to be more friendly to users with mobile phones and tablets, and has boosted content and improved layout and navigation. Orojimi says: “The revamp was fuelled by feedback from users that wanted certain high demand pages easier to navigate and some key changes implemented. For example, using analytics from visits and usage of our website, we added filter functionality to the corporate disclosure page to enable users browse through results filed by listed companies easily. Our online visitors can now experience a more vibrant and seamless view of our offerings”.

African issuers raise $1.4bn in IPO share offers in 2017

African share issuers have raised $1,379 million ($1.4bn) in 2017 through initial public offers (IPOs) of shares, compared to $1,154m ($1.2bn) in 2016, the second year of increase. However, the number of domestic African IPOs was down to 7, compared to 15 in 2016. The number of cross-border IPOs in Africa was 2 in each year.

The research was released today (15 December) in the latest Global Cross-Border Index from law firm Baker McKenzie. African issuers raised a total of 19.5% more capital in 2017 through IPOs was up 19.5% on 2016. Worldwide, issuers have increased IPO activity by 44% to $206.6bn and there were 1,694 new listings, up 31%.

Swiss issuers accounted for both cross-border IPOS in Africa in 2017. Aspire Global Plc listed on the Nasdaq First North Exchange, raising $38.96m, and Rainbow Rare Earths Ltd raised $8.22m when it listed on the London Stock Exchange. The total they raised was $47m, compared to $246m raised through cross-border IPOs in 2016.

Wildu du Plessis, Partner and Head of Africa at Baker McKenzie in Johannesburg, commented in a press release: “Africa’s uneven FDI (foreign direct investment) picture reflects the global uncertainty, but local challenges aggravate the unevenness.

“IPO activity is highly dependent on political and economic instability, particularly in the key markets of South Africa, Kenya, and Nigeria. In 2016, more FDI flowed to the hub economies, with new East and West Africa clusters emerging. This trend also dominated in 2017, and while South Africa has the most attractive exchange for issuances, the new clusters are shaping up to drive the IPO landscape going forward.”

“African economies have also engaged in repricing. The most tangible manifestation of this repricing has been rapid fall in some currencies as export revenues slid. This has created shortages of foreign exchange. The currency slide, has in turn, led to an increase in consumer prices, which impacted the retail, logistics, and other consumer-oriented sectors. Currency falls, however, can also create longer-term opportunities, because assets become cheaper,” he said.

Du Plessis added that he expected in coming years that more governments across Africa will privatize state-owned entities through listings, this would boost development of regulatory frameworks. In turn this will inspire market confidence in African bourses. Privatizations can be partial or full.

“In addition, removing barriers to cross-border investments through regional integration, would harmonize regulations and increase cross-border investments. This would provide more choices of financial products for investors in future,” he noted.

Global IPOs

According to Baker McKenzie, worldwide IPO volumes in 2017 reached the highest level since 2007. Momentum built through the year with an acceleration in both volume and value of capital raised in the second half. In total, 1,694 companies raised $206.6bn from IPOs, a jump of around a third in both value and volume on 2016. Both cross-border and domestic activity grew.

Cross-border deals jumped by 60% in volume, growing in all regions, including Latin America, which saw its first cross-border listing in 10 years. However, growth in cross-border capital was once again outpaced by growth in domestic capital raising, which rose 55% in value. This led to a slight decline in Baker McKenzie’s Global Cross-Border Index.

Koen Vanhaerents, Global Head of Capital Markets at Baker McKenzie, commented: “The IPO market in 2017 has put in its best performance in 10 years. A more stable political environment in some of the key markets, combined with strong economic growth, has boosted both the number of listings and the volume of capital raised.”

“With key risks to the global economic outlook easing, we expect IPOs to hit a new post-financial crisis high in 2018,” he added. “We recently forecast that domestic IPO activity will continue to rise, to a peak of over $220bn in 2018.”

About: “Baker McKenzie helps clients overcome the challenges of competing in the global economy. We solve complex legal problems across borders and practice areas. Our unique culture, developed over 65 years, enables our 13,000 people to understand local markets and navigate multiple jurisdictions, working together as trusted colleagues and friends to instil confidence in our clients (www.bakermckenzie.com).

London Stock Exchange – blue blood in the City after shoot out

“Quentin Tarantino couldn’t have written it better. After weeks of everyone at the London Stock Exchange pointing guns at each other, Reservoir Dogs-style, on Wednesday they all pulled the trigger.

“The final scene: Xavier Rolet takes one to the head, Donald Brydon reels from a gutshot, hedge funder Sir Chris Hohn makes a break for it, only to meet a hail of bullets offstage.

“A gory, unedifying, end to a film that, though being great box office, leaves all the cast bloodied.

“Rolet looks truculent in the extreme. Despite his “what, me?” statement today condemning the “unwelcome publicity” around his departure, it’s hard to believe he couldn’t have stopped all this weeks ago by having a quiet word with Hohn — through intermediaries if the gagging order on him prevented direct contact.

“Clearly, and understandably, he was miffed about getting the boot. But by letting the row run for so long, he has self-immolated a successful next career in City chairmanships. Who would hire him now? The manner of his ending will overshadow his extraordinary achievements turning the LSE around.”

This is columnist Jim Armitage in yesterday’s Evening Standard in London.

“This whole film would be fun were it not for the fact that the LSE is weakened just as it needs to be at its strongest.

“The Stock Exchange is about as essential to the City’s future financial dominance as you can get, and with Brexit coming, it has rarely been so challenged by EU rivals.

“The only character to emerge with reputation enhanced, is Mark Carney. Back in the day, the Governor of the Bank of England could order companies into line with a raise of the eyebrow. Carney lifted his beetle brow yesterday, declaring himself “mystified” by the whole affair. Within 24 hours, the squabble was over.”

The announcement from the London Stock Exchange Group came yesterday. Xavier Rolet said in the statement: “Since the announcement of my future departure on 19 October, ‎there has been a great deal of unwelcome publicity, which has not been helpful to the Company. At the request of the Board, I have agreed to step down as CEO with immediate effect. I will not be returning to the office of CEO or director under any circumstances. I am proud of what we have achieved during the past eight and a half years.”

CFO David Warren took over on £700,000 salary as interim, after 5 years at LSE and previously 9 years as CFO at NASDAQ. The Chairman of the Board, Donald Brydon, announced he would not seek a new term at the London Stock Exchange Group AGM in 2019.

Brydon paid tribute to “Xavier’s immense – indeed transformative – contribution to the business.” According to one newspaper report in City AM, over 9 years: “Rolet is widely acknowledged to have driven the LSE from a declining, if venerable, City stalwart to a major player on the international scene through acquisitions”,

The Financial Times has a great article on the drama including charts of LSE mergers and acquisitions in the top rank of world stock exchanges since 2005, and changes in the LSE share price compared to that of other exchanges.

The row started on 19 October when it was announced that the Board was looking for a successor for Rolet to leave by the end of December 2018 . That follows Rolet saying he would leave if a $13.8bn merger with Deutche Börse did not succeed – it was blocked by regulators – but then saying he would stay indefinitely. Activist shareholder Sir Chris Hohn of the Children’s Investment Fund (TCI) called for a shareholder meeting to discuss the dismissal in view of Rolet’s excellent track record.

Commentators did not dispute the track record, where Rolet transformed the institution which is at the heart of the City of London’s standing. On 4 Nov, columnist Anthony Hilton wrote this insightful defence of corporate governance and the foolhardiness of overruling the authority of the Board. “The chief executive is accountable to the board, and the board has a duty to tell him or her when it is time to go. What makes it so tough is that the problem invariably lies not with poor-quality bosses, who are relatively easy to show the door; the challenge is reining in those who have done well, those who have shown the vision and skill to move the business to a new and altogether higher level and who have in the process built a significant fan club. But it needs to be done. A major reason why good companies fail is that boards fail to exercise proper control over a successful leader who evolves into an over-mighty chief executive, and are then powerless when he overreaches himself. The danger is hubris.”

According to the FT the row is not yet over. It says the share price of LSE is down 2% since the October announcement, while that of Deutsche Börse is up more than 12%. Hong Kong Exchanges and Clearing is the other big winner, up nearly 8&, followed by CME (over 6%). The LSE share price has had a great run under Rolet.

Rolet is on “gardening leave” for the next 12 months on his £800,000 salary, although he tweeted yesterday morning “I doubt if my wife would tolerate me meddling with her vineyard although I do sample the product every now and then”. According to the news his total payout including annual bonus, deferred bonuses and long-term incentives could be up to £13m.

On 28 Nov, Bank of England Governor Mark Carney, said he was “mystified by the debate” but called for “clarity… as soon as possible”. According to City AM newspaper he said: “I can’t envision a circumstance where the CEO [chief executive] stays on beyond the agreed period.”

The Bank, which regulates the London Stock Exchange as owner of LCH (clearing house) had been informed of the LSE’s plans to appoint a new head before Rolet publicly announced his retirement in October, and has been kept updated on progress, Carney said.

Carney hailed Rolet’s “extraordinary contribution” to the LSE.

UK regulator accused of dropping standards to woo $2 trillion listing

Investment institutions are protesting moves by the UK capital markets regulator, the Financial Conduct Authority, to alter listing standards to accommodate a potential $2 trillion listing on the London Stock Exchange. Meanwhile rumours are growing that Saudi Aramco may be dropping its plans for a £1.5bn initial public offer on the New York, London or Tokyo Stock Exchange in addition to the Tadawul (Saudi Stock Exchange).

According to this article in the Financial Times, a trend towards “uber compliance” for listed securities means Aramco is thinking of selling shares to sovereign wealth funds, possibly led by China, as an alternative to a public listing which would have been the world’s largest float.

On 15 October, Aramco said the giant listing is still on: ““All listing venues under review for optimal decision, IPO process is on track for 2018”.

Plans for a giant £1.5bn ($2bn) initial public offering of only 5% of Aramco’s capital are a key part of Saudi Arabia’s Vision 2030, which plans to wean the economy off reliance on oil, where it made up 90% of public revenues until 2014. However, in the short term it may signal Saudi intentions to use price-fixing cartel the Organization of Petroleum Exporting Countries (OPEC) to push up oil prices and boost the valuation.

Outgoing LSE CEO Xavier Rolet accompanied British Prime Minister Theresa May for a visit to Aramco in April, while Andrew Bailey, chief executive of the FCA, agreed the regulator had met the potential listing candidate before a consultation on revising the listing standards. Many observers think there is political pressure on FCA and LSE to win the listing from New York and prove that London is still competitive as Brexit uncertainty and economic damage impacts UK.

Consultation on the FCA’s new listing rules closed on Friday 13 October. It would be the world’s largest float.

According to writer Nils Pratley in The Guardian: “Furious fund managers sense a bad case of a regulator planning to lower standards to suit ministers’ short-term desire to persuade Aramco to float in London rather than New York.

“The investors’ objection is straightforward: why on earth would we want to create a ‘premium’ listing category for state-owned companies while not enforcing normal investor protections?

“Under the FCA’s proposal, the likes of Aramco would be allowed to ignore some basic principles. They would not have to get approval from outside shareholders for transactions with the state. They would not have to give independent shareholders a vote on who should serve as independent directors.

“There clearly could be a place for such companies in London, but you would hardly award ‘premium’ status, a label that is meant to indicate the highest governance protections. The regulatory regime would look like a pushover, which may succeed in drumming up some short-term business but could seriously damage London’s status as a good place to invest.”

On 18 October, the world’s biggest wealth fund warned the FCA that the listing changes would be a “step back”, according to an article in City AM. Norges Bank Investmnet Management, part of the Norwegian Central bank which manages assets on behalf of Norway’s $1trn fund, which has $44bn invested in LSE companies, wrote on 13 October to FCA:

“Ultimately, investors expect today’s high standards of shareholder protection to apply to the premium listing category, whether controlled by a sovereign state or private investors. We fear that relaxing these rules would reduce the voice of minority investors and undermine the independence of the board.”

NBIM said the changes would be a “step back” in terms of investor protection, especially for minority shareholders, and would threaten the London Stock Exchange’s standing as a best in class corporate governance framework: “We believe the FCA should consider a more balanced approach that takes into consideration the interests of all stakeholders in the listing environment.” Other protests about relaxing the listing rules have come from a wide range of institutions, including the Institute of Directors and investor group the International Corporate Governance Network which said the plans were “fundamentally flawed” and increased risk. The Investment Association boss Chris Cummings said the change: “could impact on London’s reputation and future as one of the world’s leading financial centres”.

FCA’s Bailey had told Parliament that people would not need to invest in the new listing if they did not like the governance. According to this article , he wrote: “We do not think protections for investors will be weakened. Plainly, absent the new category, sovereign-controlled companies would be unable to choose a premium listing; they would therefore not be bound by any of the premium listing requirements that might otherwise offer additional protection for investors.”

Bailey said some criticism of the proposal left the “incorrect impression that the premium listing is monolithic in form, and therefore, that any issuer included in that category must also be included in the main FTSE UK index”. Financial services advocacy group The CityUK supported the FCA’s “open-minded approach to regulatory change”.

Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said it will be “bad news” for London if the proposals are put in place: “It looks like the FCA is consulting on amending the existing listing rules to accommodate the peculiarities of one company, which is not a very effective strategy for regulating the market as a whole. If the proposals in this consultation document are implemented, it will be bad news for London and will reverse the progress we have made in recent years to uphold strong governance and protect minority shareholders.”

According to the Financial Times: “A market regulator that makes transparent and fair rules, respecting both property rights and investor choice, will attract business in the long run. If, on the other hand, attracting business becomes a short-term goal, and rules are tailored to land big deals, regulation becomes marketing, and the long-term outlook becomes much less attractive.”

Saudi Aramco says its 2018 listing is on track (photo Reuters/Ali Jarekji)

Runaway gains continue as Zimbabwe Stock Exchange soars

Zimbabwe Stock exchange continues to soar, with gains of 9.3% yesterday (14 September) in its industrial index which closed at 379.95, after climbing 10.3% on 13 September, its biggest one-day gain according to the Herald newspaper. Market capitalization by close of 14 September was US$10.7bn.

The industrial index opened the year at 144.53, so it has more than doubled with 163% gain. The mining index has climbed from 58.51 to close 14 September at 84.65, up 45%. Most of the gain in the industrial index comes in the last 3 months, as shown on African Markets website.

Turnover was $5.2m on 14 September, with foreigners buying $1.5m and selling $4.3m in 162 trades, according to the excellent ZSE website . Meanwhile the Herald newspaper reported turnover on 13 September at $9.0m was one of the highest for the year with foreigners selling $3.5m worth of shares and buying just above $104,000.

Biggest volume on 14 September was in Delta Corporation, which traded $2.0m worth of shares as the price climbed 44 cents (19.9%) to $2.6656 after hitting a year high of $2.6675. On 13 September it had climbed 13% in $2.37m worth of trading, according to the Herald. Barclays Bank traded $1.1m with a price gain of 0.52 cents to close at $0.0852, up 6.5%. Other strong gains were brickmaker Willdale, up 27% in the day to 1 cent ($0.0100) after climbing 58% on 13 September. CBZ Holdings, First Mutual Properties and Nampak Zimbabwe which each scored 20% gain, while Old Mutual was up 19.9%.

Starafricacorproation climbed 14% to close at 2.5 cents ($0.0250) after a reported 67% gain on 13 September, Other top risers on 13 September, according to the Herald, were agribusiness Ariston up 52%, Zimre Property Investment up 37% and hotelier African Sun up 20%.

Seed Co is reportedly seeking to raise $30m and list on a regional exchange. Fast foods retailer Simbisa brands continues to trade under cautionary that it plans to list on the London Stock Exchange AIM board.

A week ago the rally was already in full swing as the ZSE market capitalization reached $8bn and the industrial index hit 286.63. The Herald reported on 11 September “Local investors have been buying into the equity market as a hedge against currency uncertainties and shortages. Most cash-rich Zimbabwean companies and individuals have been failing to access their cash locked in banks due to foreign currency shortages. Business, especially manufacturers and mines, have also been struggling to make foreign payments since the foreign currency shortages intensified at the beginning of 2016. This is the cash that is now being deployed into the stock market, considered a safe haven by many.”

The newspaper reported one investor worried that cash holdings at the banks, even in foreign currency, would not represent fair value “Investors are thus looking at hedging against this loss of value by buying into stocks.”

This web report on Charles Rukuni’s Insider Zim also worries that it is a rerun of 2007: “A stock market running on fumes and not any real fundamentals, a currency crisis and signs of inflation? We have seen this all before. In 2007, just like today, the ZSE became the world’s best performing market. Shares were up close to 600% by mid-year in 2007. Year-on-year, by April 2007, the stock market had risen a massive 12,000%. We now know it was all a deception; it was only going up because investors had nowhere else to put their Zimbabwe dollars, whose worth was evaporating fast. Then, as now, it did not matter that a company was performing badly.”

Strate’s CEO Monica Singer steps down to focus on blockchain

Monica Singer, the former CEO of South African central securities depository Strate, stepped down at the end of August 2017. Monica had been the project manager of Strate since its inception, and has led the organization for nearly 20 years. She will concentrate full time on blockchain.

Maria Vermaas, who has been Head of the Legal and Regulatory Division since the start of Strate, has been appointed as Interim CEO. The long-standing executive team will continue to drive strategic objectives, according to an announcement from Strate, which adds that Monica is leaving “to fulfil her dream of living in Cape Town and to pursue new opportunities”.

“Monica’s entrepreneurial spirit, together with her visionary leadership” drove the introduction of electronic settlement for South Africa’s financial markets. Strate is proud of “being a Conscious Company that creates shared value for all stakeholders” and globally recognized as one of the most progressive CSDs.

Monica says (in the statement): “I have always had a passion for innovation and technology that drives societal change. With the potential disruption that the financial markets may face, particularly with disruptive technologies like blockchain, I will continue to research to stay ahead of developments which may lead me to consulting on these topics.”

She has been key in several networks that share ideas internationally including as Vice President of the Africa & Middle East Depositories Association (AMEDA), over 18 years in the International Securities Services Association (ISSA), World Forum of CSDs (WFC) and Americas’ Central Securities Depositories Association (ACSDA).

Strate Chairman Rob Barrow, comments: “The Board, together with the Executive team and staff, would like to thank Monica for her contribution to Strate and the legacy that she has left behind. We would like to wish her all the best for her future endeavours.”

Full time in blockchain
According to this news story by Michael de Castillo on Coindesk, Monica is devoting her considerable energies “to dedicate her career to bringing blockchain to industries from finance and insurance to medicine and retail”.

Monica Singer: Blockchain is coming and its going to change the world (Photocredit: coindesk)

“In her first conversation with the media since her resignation, Singer explained how she believes the tech could help her finally cut out what she describes as ‘unnecessary middlemen.’

“Singer told CoinDesk: ‘I’m so in love with blockchain, that the only thing I’m doing, all the time, is telling the world, “Guys, wake up! This is coming, and this is going to change the world.”’ According to the story, Monica will use her global contacts to widen her interest beyond the financial sector. The article mentions ethereum startup ConsenSys and digital ledger startup Ripple among the “fintech” companies Monica is interested in working with.

She still believes CSDs can provide important services, even if blockchain means they will “not have a role to play” in the blockchain world. She is set to speak at the Sibos banking conference in October on blockchain in the cash and securities settlement space and at the World Federation of CSDs in Hong Kong in November.

It quotes her saying: “I love saying to people: ‘Give me a brief description of your industry.’ I can quickly tell them in which way that industry will be affected by this new, incredible technology. So, that’s what I need to do.

“I was the person who moved South Africa’s financial markets from paper to digital.. When I discovered blockchain, I thought this is exactly what we need in the world.”

Brief history of clearing and settlement in South Africa
Johannesburg Stock Exchange rang the final bell on 108 years of open-outcry trading on 7 June 1996. Most recently trading had been in a huge hall at the bottom of its then headquarters in Diagonal Street, so the noise of trading filled the whole building when the market got busy. From market open on 10 June all equity trading has been on the automated Johannesburg Equity Trading system. As volumes increased, stockbroker back offices talked about “how many feet of work do you have?” referring to the huge piles of share certificates and transfer forms stacked high on desks, while the motorcycle delivery drivers at the back of Diagonal Street and Kerk Street, Johannesburg, got ever busier.

Electronic clearing and settlement were urgently needed but the banks that dominate this aspect of capital markets had each invested in their own systems. They had further formed the Bond Market Association to create a self-regulating bond exchange in 1990 and had worked with the South African Reserve Bank the same year to form UNEXcor to set up an electronic settlement system using a CSD. The first fully electronic settlement through UNEXcor and the CSD (called CD Ltd) had been on 26 October 1995.

Monica, famous for long-term vision backed by unstoppable energy, was brought in to break the logjam and move the market forward in 1998. Gold-mining group Harmony was the first equity on the JSE to move to full dematerialization of securities in 1999 and the whole market followed in orderly stages.

According to a brochure by Strate a few years ago: “The transition to an efficient electronic-settlement system increased market activity and improved the international perception of the South African market by reducing settlement and operational risk in the market, increasing efficiency and ultimately reducing costs. Accordingly, by heightening investor appeal, Strate has enabled South Africa to compete effectively with other international markets and not just those of emerging markets.

“Since 2000, Strate has used the South African Financial Instruments Real-time Electronic Settlement system (SAFIRES), an adaptation of the Swiss securities settlement system (SECOM), operated by SIX SIS Ltd, to continuously provide investors with secure and efficient settlement of equities.”

UNEXcor merged with Strate in 2003 and as the platform became more aged, Strate began market consultation to replace the technology and move to a Securities Ownership Register for bonds.

Participants set up the Money Market Forum in 2002 for dematerialization of money-market securities and awarded the contract to do this to UNEXcor, which devolved to Strate after the merger. After extensive market consultation, Strate developed the business requirement and employed Tata Consultancy Services (TCS) to develop the code. Successful testing was completed on 1 October 2008 and Rand Merchant Bank issued the first electronic security to Strate via FirstRand Bank in November 2008. Electronic settlement of newly issued money market securities began in the second half of 2009.

The latest transformation was the switch to T+3 settlement across the South African capital market, carried out successfully on 11 July 2016 and profiled on this blog.