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Stock Talk: South Africa’s Newest Market

12 August 2016 Comments (0) Africa, Business, Featured

Johannesburg Stock Exchange

South African company Zar X has been given license to open a new stock exchange market, the first new market in more than 100 years.

For many in Africa, the world of stock exchange and brokerage is an elite realm for the wealthy and well educated. The outside fees alone, paid to brokers and investment firms, are enough to deter a huge proportion of the world’s population, not to mention the financial literacy required to make informed trades. In developing countries, where stock exchanges may be inaccessible for all but a small portion of the population, this is particularly true. Many stock exchanges are centuries old. South African company Zar X is changing the scene: as of September 1st, they are expected to launch trading in a low-barrier, low-risk market for the first time in the country’s history. This exciting development is expected to open up the world of stocks to a much wider demographic, enabling less-wealthy South Africans to participate in the global economic market.

Taking Stock

In March of this year, Zar X was granted a stock exchange license by the Financial Service Board, the first company to have received one in more than a century. Founder and CEO Etienne Nel says that Zar X’s “initial focus will be on low-hanging fruit – the companies that the Johannesburg Stock Exchange (JSE) cannot list, like the traditional over-the-counter market and the related shares around this market.” For the last 120 odd years, the Johannesburg Stock Exchange (JSE), South Africa’s first and previously only stock exchange, has offered T+5 and T+3 settlements, or trades that take five or three days, respectively, to clear into an investor’s account.  Zar X will be the only exchange to offer T+0 settlements, or same day settlements.

The more complex trades (T+5 and T+3)  will still be offered on the JSE, but for restricted trades and mid-size company listings (companies worth between US $36million and US $360million), Zar X will be the go-to listing. These companies have different rules for listing shares than larger companies, and are therefore more accessible for individuals without investment experience. Zar X “will offer simple, fast and affordable platforms for corporate listings and share trading, with strong focus on the market in restricted equity offerings, primarily black empowerment securities.”

An Exchange for the Everyman

According to their website, “ZAR X is a platform that lets everyday South Africans transact shares quickly, cheaply and conveniently, even if they have never formally invested money or opened a bank account before.” For the millions of South Africans without bank accounts, this is a potentially life-changing opportunity. Zar X will offer businesses a flexible, transparent and affordable way to list their restricted or limited share offerings through its three sections: a main board for company listings, an “over-the-counter” stock trading business, and an investment products market. Zar X differs from the JSE for a variety of reasons, including that it will allow shareholders to invest without custody fees. Custody fees are one of the barriers to people from lower-income households to enter the stock market: these are fees charged by the individual investor for handling a clients’ money. Since Zar X allows investors to work directly in the market, there will be no broker to collect these fees. This, along with the innovative trading and company listing regulations, is a game-changing move by Zar X. It has the potential to make trading accessible for millions of people who were previously prevented from participating.

Trading for Empowerment

Zar X is expected to have a very positive impact upon South Africans for a variety of reasons. This new opening in the market will allow a greater diversity of tradeable shares, thus increasing competition between companies that were previously without representation. Aside from the numerous economic impacts, Zar X stands to have quite a social impact as well. Nel was inspired to create Zar X out of a desire to open up the stock market to a wider group of people. This project will not only increase financial literacy for South Africans with little to no financial experience, but may also be an important empowerment project for South Africa’s working class. Financial autonomy is a large component of self-confidence, and by increasing the scope of representation within the global market, South Africans will be able to view themselves as financially capable global citizens.

 

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Egypt’s Beltone files lawsuit against heads of bourse and watchdog

26 June 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s Beltone Financial has filed a lawsuit against the heads of the Cairo stock exchange and Financial Supervisory Authority over the repeated cancellation of trades on its stock, according to two sources and a court document seen by Reuters.

Shares in asset manager Beltone jumped by more than 550 percent in three months after it was acquired by billionaire businessman Naguib Sawiris’s OTMT in November for 650 million Egyptian pounds ($73 million).

The price spike lifted Beltone’s market value to 4 billion pounds before the stock exchange, at the end of February, began to stop trades in the shares on an almost daily basis. The exchange referred to rules allowing such cancellations in cases where the head of the bourse considered that trades had taken place at unjustified prices.

Beltone’s share price stood at 7.34 pounds on Sunday, compared with 21.97 pounds in mid-April.

“Beltone filed a lawsuit before the Administrative Court against the head of Egypt’s stock exchange, in person, and against the chairman of the financial regulator,” said two sources who are close to the matter.

The lawsuit contests that the head of the stock exchange’s decisions were incorrect and an illegal abuse of authority.

The head of Egypt’s stock exchange, Mohamed Omran, was not immediately available for comment.

Sherif Samy, chairman of the Egyptian Financial Supervisory Authority, said that Beltone had filed a grievance with the regulator earlier this month.

“The decision of the commission did not come in its favour and that is why they are resorting to court, and that is the right of any party,” Samy said.

($1 = 8.8799 Egyptian pounds)

 

(Reporting by Ehab Farouk; Writing by Asma Alsharif; Editing by David Goodman)

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Algeria seeks to boost its tiny stock market

7 April 2016 Comments (0) Business, Featured, Middle East

Challenges include lack of knowledge of stock investment in the domestic market, lack of liquidity in investments and competition from more traditional investments.

Algerian officials are looking for ways to boost investment in the country’s stock exchange, which is one of the world’s smallest.

The relatively young exchange, based in Algiers, lists only four companies and has a capitalization of less than $140 million.

Officials hope to increase the capitalization to $1 billion in 2016 by listing additional companies.

The stock exchange faces several challenges, including lack of knowledge of stock investment in the domestic market, lack of liquidity of investments and competition from more traditional investments.

Biopharm offering attracts little interest

A recent initial public offering by the Algerian pharmaceutical company Biopharm had a lackluster start, raising only $6 million in its first week, far less than the $5.5 billion, or 20 percent shares in the company, on offer.

According to experts, Biopharm has clear advantages as an investment. It operates in the health sector, which is expected to grow as the population ages. It has a solid record of financial results, including net revenue of $32 million in the first three quarters of 2015 and promises a return of 14 percent.

Stock market is seen as a novelty

Investing in the stock market is a relative novelty in Algeria, which only established the exchange in 1999. Instead consumers favor more traditional investments, such as real estate, which are seen as more stable and safe. Another popular investment is to convert Algerian dinars to Euros, which in recent years has yielded higher returns than the Algiers-based stock market.

Another problem is the lack of liquidity of stock investments. Given low consumer interest in the exchange, it can be difficult for those who want to sell to quickly find stock buyers.

The stagnant Algerian exchange contrasts with the largest stock exchange in the region, in Saudi Arabia, which is also the largest economy in the region.

Saudi market capitalization is $570 billion

The Saudi market capitalization is $570 billion, or about one percent of the world stock market and larger than the main market in Russia. The exchange is highly liquid, with a daily trading volume of $2.5 billion, making up 65 percent of the trading in the entire region.

Saudi stock exchange

Saudi stock exchange

The Saudi exchange, which has issued several initial public offerings, opened to foreign investment in 2015. The exchange is primarily geared to larger foreign investors in order to promote stability.

Other large exchanges in the region are in the United Arab Emirates, with a market capitalization of $245 billion, and in Qatar, where the stock market is capitalized at about $200 billion.

Algeria’s neighbors also have active stock exchanges. Morocco’s exchange is capitalized at approximately $48.8 billion with 77 companies listed. Tunisia’s exchange has a market capitalization of $9.2 billion with more than 70 listings.

Algerian government seeks to boost exchange

Some have said the Algerian government should be doing more to promote that nation’s stock exchange.

Algerian Finance Minister Abderrahmane Benkhelfa recently met with representatives of the stock exchange, bank managers and other key players to explore ways to “boost the stock market.”

Benkhelfa stressed “the need for synergy and dialogue among the organizations to give more credibility to the financial market.”

The minister said the stock exchange needed to be modernized with improvements in company transparency, including regular publication of their financial statements, and efforts to improve competitiveness. He appealed to Algerian companies to join the market to fuel their growth.

He said the upcoming listings of Biopharm in April and of Aïn Kbira of Sétif, a cement company, in May, would help boost the market’s value significantly.

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South Africa grants first bourse licence in over 100 years

30 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa has issued its first stock exchange operating licence in more than 100 years, paving the way for a local company to compete with the Johannesburg Stock Exchange (JSE).

ZAR X Stock Exchange said on Wednesday it would start operating in September after securing approval from the Financial Service Board (FSB).

The bourse will be the second exchange after the more than a century old JSE, Africa’s biggest and most liquid stock market.

ZAR X plans to facilitate listings of restricted share schemes, currently trading over-the-counter (OTC), which the FSB ruled were in contravention of capital markets regulations.

 

(Reporting by Nqobile Dludla; Editing David Evans)

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South Africa assets soften, investors risk-wary ahead of long weekend

25 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African assets ended a shortened trading week on the backfoot on Thursday, with expectations of higher U.S. interest rates hurting the rand and investors taking no chances before the four-day Easter weekend.

In equities, shares in mobile networks operator MTN blazed the downhill trail, sliding over 10 percent as they traded ex-dividend and on the emergence of new complications in its efforts to cut the size of a hefty fine it faces in Nigeria.

Nigeria’s parliament has launched a probe into whether the telecoms regulator can reduce a fine slapped on MTN for missing a deadline to disconnect unregistered SIM card users, a lawmaker said on Thursday.

The move might complicate efforts by Africa’s biggest cell phone operator to reduce the fine, which had originally amounted to $5.2 billion and was cut by Nigeria’s telecoms regulator to $3.9 billion in December.

Overall, investor appetite for South African assets was dimmed by the prospect of getting caught out ahead of a four-day holiday weekend.

“People don’t want to go into the long weekend holding the rand. There is risk aversion all round but South Africa, including equities, has been hit quite badly,” said Bart Stemmet, an analyst at NKC African Economics.

The benchmark Top-40 index slipped 0.57 percent to 46,349.01 while the wider All-share index declined 0.47 percent to 52,323.78. It was the third straight session that South African stocks ended in the red.

Trade volumes were thinner than usual with around 211 million shares changing hands.

At 1520 GMT, the rand traded at 15.5650 per dollar dollar, 1.33 percent weaker from Wednesday’s New York close of 15.3600. Government bonds were mixed, with the yield for the benchmark instrument due in 2026 flat at 9.37 percent.

 

(Reporting by Ed Stoddard and Olivia Kumwenda-Mtambo; Editing by Tom Heneghan)

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Tanzania stock exchange poised for initial public offering

26 January 2016 Comments (0) Africa, Business, Featured

dar es salaam stock exchange

The East African nation will become one of only three on the continent that is owned by shareholders.

Tanzania’s stock exchange is poised to join an elite African club as it finalizes plans for an initial public offering by the end of March.

Only two other African exchanges trade their own stock. The Johannesburg Stock Exchange became self-listing in 2005, followed by the Nairobi Stock Exchange in 2014. But about a dozen more African countries are considering the change.

In Tanzania, the Dar es Salaam Stock Exchange (DSE) has an application for the initial public offering (IPO) pending before the Capital Markets and Securities Authority.

With approval, the stock exchange expects to conduct both its initial public offering (IPO) and self-listing before the end of the first quarter this year, according to Moremi Marwa, chief executive officer of the exchange.

Stock exchange will be owned by shareholders

In this process, the exchange will demutualize, which means it will change from a member-owned entity to become a public limited company that is owned by shareholders. Once the self-listing is completed, the name of the exchange will be changed to Dar es Salaam Stock Exchange Public Limited Company (PLC).

Conversion to a public limited company is expected to strengthen governance of the exchange and enable it to better ensure financial sustainability since it will be able to raise funds through rights issues or bond issues.

This translates into access to efficiently priced funds to finance the exchange’s growth, including investments in new trading technologies, products and services as regional financial markets become more competitive.

Ambitious plans for growth

The Dar es Salaam Stock Exchange has a market capitalization of 20.8 trillion Tanzanian shillings ($9.5 billion). The exchange has an ambitious goal: By 2017 it aspires to build more than double its market value to equal half of Tanzania’s gross domestic product, which was estimated at $40 billion in 2015.

Last year, the stock exchange scrapped controls on foreign ownership of shares in order to boost demand. As a result, the exchange was Africa’s best performer last year, when it gained 64 percent. Trading in November totaled more than $42 million, according to the African Securities Exchanges Association.

Marwa also said he expects the Tanzanian exchange to add at least five new listings of equities and corporate bonds this year.

Currently, 22 companies are listed or cross-listed on the exchange, which was founded in 1996 and began trading in 1998.

Self-listing trend grows

Self-listing by stock exchanges started when the Stockholm Stock Exchange made the change in 1993, followed by Helsinki (1995), Copenhagen (1996), Amsterdam (1997), the Australian Exchange (1998) and Toronto, Hong Kong and London stock exchanges in 2000.

Given the advantages of demutualization, Marwa said more than a dozen other exchanges in Africa are considering initiating the process. There are 29 stock exchanges on the continent.

Despite its growth in 2015, the Dar es Salaam Stock Exchange is dwarfed by Africa’s largest stock exchange, the Johannesburg Stock Exchange with a market capitalization of more than $1 trillion.

Tanzania’s economy is the 12th largest in Africa. It grew by more than six percent in 2015, with infrastructure construction and transportation projects in the run-up to national elections driving economic growth.

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Nigeria stocks hit 3-1/2-year low as funds sell on naira woes

14 January 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LAGOS (Reuters) – Nigeria’s share index tumbled 3.4 percent on Thursday and hit its lowest point in almost 3-1/2 years, spooked by the weak outlook for the currency, traders said.

The share index, which has the second-biggest weighting after Kuwait on the MSCI frontier market index, has fallen for five straight days, sliding below the psychologically important 25,000 point line not seen since September 2012.

At the market close, the index was down 3.4 percent at 24,239 points. The index has dropped 12.4 percent in the first nine days of trading this year.

Currency and stock markets in Africa’s biggest economy have been hit hard by the fall in the price of crude oil, Nigeria’s main export, which has slashed government revenues and triggered an exit of foreign investors.

“From what foreign investors are telling us, when they have confidence in the naira/dollar exchange rate they can then make investment decisions,” Oscar Onyema, CEO of the Nigerian Stock Exchange told Reuters.

The naira has dived 34 percent on the black market compared with its official level of 197 after the central bank stopped dollar sales to retail currency outlets. The move has intensified speculation that Africa’s top oil producer will have to formally devalue its currency soon.

Onyema said the bourse expected 2016 to be challenging for the market after the index shed 17.4 percent last year with losses continuing into this year, as oil prices plunged and the domestic economy faltered.

Foreign buyers, who accounted for 54 percent of trading volumes, were on the sidelines owing to the lack of clarity on Nigeria’s forex policy, highlighting naira weakness as a deterrent to a market rally in 2016, he said.

The index of Nigeria’s top 10 banks fell 4.69 percent to lead the bourse lower. Top decliners included Seplat, Oando, Guaranty Trust Bank and FBN Holdings all down more than 9 percent.

“With crude oil prices down, accretion to FX reserves is out of the question … putting investors on red alert. The central bank may not be able to meet all the demand for FX even if it were to devalue,” said Ayodeji Ebo, head of research at Afrinvest.

 

(Reporting by Chijioke Ohuocha and Oludare Mayowa; Editing by Hugh Lawson)

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Bargain buying lifts South Africa’s stocks, rand weak

22 December 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African stocks rose to a more than two-week high on Tuesday, bolstered by bargain hunters and a recovery in oil prices from its lowest level in more than a decade, while the rand dipped in holiday-thinned trade.

The benchmark Top-40 index rose 1.2 percent to 44,900.59, while the broader All-Share index rose by the same margin to 49,780.33.

“What we are seeing is a bit of buying before the close of the quarter,” said Sanlam Private Investments’ portfolio manager David Peacock. “Some stocks were oversold, so now we are seeing some nibbling [back].”

A recovery in oil prices from 11-year lows as investors unwounded some of their bearish bets on the battered commodity also helped boost stocks such as petrochemicals company Sasol, which rose by 2.61 percent to 393 rand.

Other gainers included Africa’s largest mobile operator MTN, which gained 4.53 percent to 141.16 rand, while its rival, Vodacom added 2.34 percent to 151.72 rand.

Among the losers was Tiger Brands, which fell 1.81 percent to 318.00 rand.

Trade was light, with 153 million shares changing hands on the stock market, according to preliminary bourse data, well below the average of 183 million shares.

On the forex market, the rand weakened in shallow, range-bound trade following its brief relief rally ahead of the holiday season.

Trade is expected to be subdued for the remainder of the year as most domestic market players are on holiday, and with no major economic news to provide direction for the rand.

By 1523 GMT the rand had weakened 0.49 percent to 15.1700 per dollar compared to 15.1030, where it closed overnight in New York.

“We expect the rand to hover around R15/$ for the rest of the year,” said NKC African Economics analyst Bart Stemmet. “We see risks to the rand at its current levels to be balanced.”

Government bonds were weaker, with the benchmark paper due in 2026 adding 9 basis points to 9.445 percent.

 

(Reporting by Nqobile Dludla and Thekiso Lefifi; Editing by Ed Stoddard)

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South Africa’s stocks extend losses after Nene sacking

11 December 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s main stock index slumped more than 2 percent on Friday as jittery investors continued to pull out of the market after Wednesday’s shock dismissal of the finance minister.

Banks, which are most at risk if South Africa’s credit rating is downgraded in the wake of the removal of Nhlanhla Nene, led the decliners, with Barclays Africa plummeting nearly 20 percent.

 

 

 

(Reporting by Tiisetso Motsoeneng; Editing by James Macharia)

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South African stocks fall to 3-1/2 month low, rand firms

6 December 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African stocks fell by more than 2 percent on Friday as investors priced in a possible downgrade from ratings agencies, while the rand rallied as the greenback failed to make meaningful gains.

Standard & Poor’s kept South Africa’s credit rating at BBB- on Friday but changed its outlook to negative from stable, saying this reflected the view that economic growth might be lower than expected.

Fitch, which was due to issue its rating statement later, rates South Africa at “BBB” with a negative outlook and warned of a possible downgrade in September.

The benchmark Top-40 index slipped 2.26 percent to 44,347 points while the broader All-Share index fell by the same margin to 49,284 points.

“The market pricing in a bit of weakness coming in from the expected downgrade from Fitch and S&P later today. We are seeing weakness across the board,” said Ryan Woods, a trader from Independent Securities.

Furniture retailer Steinhoff fell 7.23 percent to 77 rand after the company said it was being investigated by the German authorities for the accounting of certain transactions by its German unit.

MTN Group fell 3 percent to 135.74 rands after Nigeria’s telecoms regulator said it had cut a fine on Africa’s biggest mobile firm by 25 percent to $3.9 billion, and blamed a typing error for an announcement on Thursday it had reduced the penalty by 35 percent to $3.4 billion.

Trade was highly active, with 419 million shares exchanging hands – the highest since June 18 – compared with last year’s daily average of 187 million shares.

On the forex market, the rand inched up, having fallen briefly to 14.3500 to the dollar after S&P’s outlook downgrade.

By 1704 GMT the rand was at 14.3300 against the greenback, 0.24 percent up Thursday’s close of 14.3645.

The dollar was nearly flat against the euro despite stronger-than-expected U.S. monthly jobs data, as markets continued to digest Thursday’s unexpectedly small stimulus from the European Central Bank.

“It shows that there is a lot priced in this market and as a consequence when the data comes through there isn’t much follow through,” said Barclays Africa currency strategist Mike Keenan.

Government bonds were quoted weaker.

The yield for the benchmark instrument maturing in 2026 rose by 1.5 basis points to 8.650 percent, after touching its highest since late Fed 2014 in early trade.

 

(Reporting by Zandi Shabalala and Nqobile Dludla; Editing by James Macharia)

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