NO 243 – MAY 2013

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WFE Focus May 2013
EXCHANGE FOCUS: WFE INTERVIEWS THE STOCK EXCHANGE OF MAURITIUS
SUNIL BENIMADHU
CEO,
The Stock Exchange of Mauritius

FOCUS: Could you give us a bit of background about your exchange?

SEM: The Stock Exchange of Mauritius (SEM) was set up in 1989 as part of an overall initiative to modernise Mauritius’ financial services sector and accelerate the transformation of Mauritius into a modern and diversified economy. The SEM started its operations as a small pre-emerging exchange with a manual trading platform, but has during the last two decades witnessed a significant overhaul of its operational, technological and regulatory frameworks which has placed it among the leading exchanges in Africa in terms of operational excellence. The size of the market has grown from a market capitalisation to GDP ratio of less than 4% in 1989 to a current market Cap/GDP ratio exceeding 70%, in an economy that has witnessed a 5% average growth rate during the last 25 years. SEM has also, over the years, acted as a powerful value-creation platform for listed companies and has played an important role in the democratization process of the Mauritius economy by enabling a large number of retail investors to participate in the growth story of a number of listed companies. SEM trades equity, debt products as well collective investment schemes. We are currently actively pursuing an internationalisation strategy which aims at building the Exchange’s current and future growth on the back of regional and international niche listings on our highly competitive, flexible and yet rigorous listing/trading platform.

FOCUS: How active are foreign investors in your exchange? How accessible is your market?

SEM: The stock market was opened to foreign investors in 1994 and foreign investors can freely invest in any security listed on SEM. Foreign investors have, over the years, emerged as key players on the SEM and currently account for about 40% to 45% of the daily trading volumes on the Exchange. Given the growing interest that frontier markets like Mauritius are attracting from international investors in search of investment opportunities in high growth economies, we expect further increases of foreign investment inflows on the SEM in the coming years.

The SEM’s trading platform is very accessible to foreign investors. Our internet trading system, I-Net, enables these investors to follow the market on a real-time basis, act on a real-time basis and take advantage of investment opportunities as and when they occur. Foreign investors also benefit from numerous incentives such as tax-free dividends and tax-free capital gains. Furthermore, no stamp duty or registration duty is payable on dealings in securities that are listed on the Stock Exchange.

We would like to capitalise on Mauritius’ excellent position as a gateway linking US/Europe/Asia to Africa and position the SEM as a capital-raising, listing and trading platform for Africa-focused ventures.

FOCUS: What new project/product are you currently working on?

SEM: Since 2010, the SEM has embarked on an internationalisation strategy which aims at moving up the value-chain of products listed/traded on the SEM platform and positioning Mauritius as an attractive listing, trading and capital-raising platform for Global funds, Global business companies which are incorporated in Mauritius and which use Mauritius as a service platform to accede to the emerging regions in Asia and Africa. The SEM has already implemented a number of concrete initiatives to achieve these objectives, namely:

  • The introduction of a multi-currency listing, trading and settlement platform that allows issuers to list and trade their securities in USD, Euro, GBP and ZAR and settle the underlying transactions in these four international currencies.
  • The implementation of competitive rules to cater for the listing of a wide spectrum of Global funds including, amongst others, specialised funds, professional funds, real-estate funds and other focused fund structures.
  • The adoption of competitive rules to attract the listing of Global Business Companies on the Exchange and use the Exchange platform for capital raising. Listing Rules have also been introduced to cater for the listing and trading of specialist debt-instruments targeted to qualified institutional and retail investors.
  • The introduction of depositary receipts rules targeting African issuers that wish to raise capital from international investors.

Another upcoming project is the launch of the trading of Exchange Traded Funds (ETFs) as well as structured products on the SEM platform. Last but not least, our Exchange is also contemplating implementing the concept of remote membership to attract foreign brokers and foreign participants to our market, which will constitute an important step towards a better integration of our securities market with the international financial markets.

FOCUS: What are the challenges you see in your market today and in the future?

SEM: I think that the challenges facing the SEM today are, on the one hand, somehow similar to those facing other stock exchanges in the world, and are, on the other hand, specific to the ecosystem in which the SEM operates. Mauritius is a very open economy and investors in Mauritius are, on a daily basis, comparing the thousands of investment opportunities that are available outside of Mauritius with those that are available on the SEM. The challenge for us, therefore, is to attract the listing of good products on our Exchange, provide our investors with an Exchange platform that is easily accessible at competitive costs and offer them niche products that are not available in other markets. We also need to capitalize on the gradual shift in international asset allocation in favour of high growth emerging and frontier markets and attract more global order flows to our market. We, finally, need to establish synergistic links with the Global funds and other investment entities which are incorporated in Mauritius, harbouring billions of dollars of investible funds, and use the SEM platform to channel some of these funds to finance the capital requirements of listed companies. This will help in positioning the SEM as an important capital-raising platform in the region.

FOCUS: How do you assess your exchange’s position at a time of increased globalization?

SEM: As a small exchange, SEM is very conscious of the threats arising out of globalisation. However, we also see a lot of opportunities in the wake of Africa’s rising. We would like to capitalise on Mauritius’ excellent position as a gateway linking US/Europe/Asia to Africa and position the SEM as a capital-raising, listing and trading platform for Africa-focused ventures. We are also committed to moving away from a historically domestic-equity-focused Exchange to a multi-product-internationally-focused Exchange. In the years to come, we expect listings on the SEM to comprise more of international niche products than domestic products. We also expect the value of products traded and settled in USD, Euro and GBP to increase over time confirming the internationalised status of SEM.