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South Africa: JSE Sizes Up Zambia, Nigeria and Mauritius
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Business Day (Johannesburg)
6 September 2007
Posted to the web 6 September 2007
Renée Bonorchis
Johannesburg
AS THE world's biggest exchanges fight for control of each other while ignoring the African continent, the JSE confirmed yesterday it was in talks with exchanges in Mauritius, Nigeria and Zambia.
"We are talking to Mauritius on an array of things," said Russell Loubser, CE of the JSE. "Buying that exchange is just one of the things that comes up."
Of the three African exchanges that the JSE is chatting with, only the Stock Exchange of Mauritius (SEM) is demutualised. This means Mauritius would be the only one it would be "easy" to buy because it has shareholders and a share price rather than members and tightly held rights.
Nonetheless, when it comes to Nigeria and Zambia, Loubser felt it would make sense to share the JSE's technological capabilities. "Our size demands we use the newest technology. Their size prohibits them from buying it. It makes sense to share," said Loubser.
As at the end of last year SEM's market capitalisation was $3,54bn, the equivalent of about R25bn.
This is not necessarily the kind of price the JSE would have to pay, but with a healthy balance sheet and an excess of cash, Loubser agreed that funding an acquisition would not be a problem.
He was also clear about the fact that the JSE would not make such a move without a solid rationale.
But an acquisition was still some way off. In the meantime, Loubser pointed out that SEM did not have a sophisticated derivatives market, an agricultural futures market or a well-developed information sales capability. These were all areas where the two exchanges could work together.
Eustace Davie, a director of the Free Market Foundation, said this week that Mauritius was "the new rising economic freedom star". The island country, which launched its stock exchange in 1989, is ranked higher than SA in economic freedom.
According to SEM's latest factbook, the exchange had 41 listed companies on its board by the end of last year, with its total market capitalisation having grown more than 46% in the year and turnover having risen 32%.
SEM has three main indexes with the SEMTRI being the equivalent of the JSE all share index. The SEMTRI, in dollar and rupee terms, has gained every year since 2001 with a particular spike in activity last year.
"SEM is very progressive. It's a lovely little exchange," said Loubser.
SEM, like the JSE, is also a member of the World Federation of Exchanges. It was Loubser and the JSE that pushed for SEM to be accepted into the world body, but Loubser says SEM did a lot to make itself ready for the event.
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Banks and insurance companies made up the largest part of SEM's market capitalisation at 36%. Leisure and hotels, unsurprisingly for this favourite holiday destination, were next at 24%. "It used to be a sugar and textile based market but they have made every effort to diversify."
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