adminchallenge to the Johannesburg Stock Exchange vision to become a gateway to Africa’s capital markets.
In an interview with Reuters recently, the incoming chief executive of exchange operator of JSE Ltd Ms Nicky Newton-King admitted that Johannesburg was facing a tough challenge from the LSE.
But she noted that JSE was offering world- class standards of disclosure for a lower price and less hassle than the London exchange.
“You can come to the JSE, you can raise the money here, and your shares will be traded in a very liquid environment, a very respected environment. Without going through the costs and the hoops of
listing in London but with exactly the same standards,” she said.
However, the trend has shown that some African growing companies trading on stock exchanges where thin liquidity keeps out large investors where opting for dual listings in London than on the JSE.
Shares of about 104 African companies trade on the LSE, with the majority on the Alternative Investment Market, a stock market for smaller companies. According to the Reuters report, the total market value of African companies listed in London is now bigger than every African exchange except Johannesburg.
“London has built a status for itself. When you are going to the market, a company listed in London versus a company listed on the JSE, people understand London, despite whatever jurisdiction you are going to,” said Reuters, citing a veteran capital market banker.
Smaller companies, especially those with the niche focus, are more likely to have more industry peers on the AIM, making valuations more accurately.
“People understand valuations on medium- sized, growing companies on AIM. They get fairly more analysed if they go to AIM.”
Just under US$2,1 billion was raised by African companies on the London Exchange in 19 transactions in 2010, representing about 90 percent of all equity capital for African- focused companies in 2010, said Reuters citing London exchange head of equity primary markets.
When the Lusaka Stock Exchange-listed Zambeef decided to have a secondary listing, it considered the London and Johannesburg stock exchanges.
But finally the company opted for London. “It was a tough decision, Zambeef executive director Yusuf Koya was quoted as saying.
“A key factor in the decision process was London’s reputation as the world’s financial centre, which allows us to access a potentially wider range of investors and liquidity.”
While not as high profile as London, Johannesburg is one of the world’s 20 largest by market value of about US$854 billion. It was ranked number one by World Economic Forum for regulations last year ahead of some leading global markets including its rival London. Shares of about 20 African countries, excluding South African firms, trade on the JSE.
Ms Newton-King said a regulatory change that would allow foreign companies to be included in tracking funds should help to attract more firms.
Online Reporter