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.

Investors in CAPE III include international development finance institutions such as CDC Group, the European Investment Bank, the International Finance Corporation, and Netherlands Development Finance Corporation. Nigeria-based institutional investors including First Trustees Nigeria Plc, AIICO Insurance Plc, Africa Re-insurance Corporation and some high net-worth individuals have also made commitments. CDC Group, an emerging-markets fund of funds backed by the UK Government, announced that it had committed $50m to CAPE III.

CAPE III will seek to acquire significant interests in companies with high growth potential and up to 40% of the fund may be invested in companies in the energy sector.  Economic reforms and liberalization in Nigeria and other West African markets, a scarcity of capital, and relative availability of attractive assets have created unique private equity investment opportunities.

CAPE III is the latest private equity fund sponsored by ACA since its launch in 1997. ACA currently manages over $500 million of aggregate capital including a $170 million real estate fund launched in 2008. Having concluded the first close of CAPE III in May 2009, ACA is targeting a CAPE III final close with aggregate commitments of $350 million. ACA mobilizes long-term capital from institutional investors to promote private sector led investments.