The seven leading African stock exchanges struck about $1.6 billion in cross-border deals in 15 months as fund managers expressed optimism on the prospects of investments in the African markets.
Cross-border deals are transactions that involve more than one financial jurisdictions or involving many stock markets and national regulatory authorities.
Official reports indicated that cross-border trading between the seven leading African stock markets for the 15-month period ended March 31, 2020 totalled $1.6 billion with a strong potential for increase over the next period.
Cross-border deals in 2019 stood at $1.1 billion while more than $500 million were traded in first quarter of 2020.
The seven stock markets included Nigerian Stock Exchange (NSE), Johannesburg Stock Exchange, Nairobi Securities Exchange, Casablanca Stock Exchange, The Egyptian Exchange, Stock Exchange of Mauritius and Bourse Régionale des Valeurs Mobilières (BRVM), the integrated stock market for eight West African countries.
The participating stock markets altogether provide trading opportunities in more than 1,050 companies, including Africa’s most promising, profitable and dominant companies while investors could also buy or sell bonds, exchange-traded funds (ETFs) and derivatives.
A survey of African fund managers showed that most investment decision-makers consider governance, good regulation and availability of market data and prices in making decisions to invest or not in a market.
The survey of 50 African asset-managers for the African Exchanges Linkage Project (AELP) project found that key factors when African fund managers choose new markets are market regulation, investor regulation and availability of market data and prices.
According to the survey, other top criteria that help fund managers choose where to invest included levels of dealing price, efficiency of execution and commission, the quality of companies and investment opportunities, corporate, social and governance criteria and availability of research.
Three quarters of investors said they were reluctant to invest in small and illiquid markets or where valuations are excessive while only half decide to invest in a company based on its dividend policy, while valuation and governance are the top factors.
Asset managers in Nigeria and the francophone West African countries are the most optimistic about prospects for Africa’s economies.
In the AELP poll, some 97 per cent of the surveyed Nigerian asset managers are optimistic about the continent, with average assets of $364 million under management, followed by 85 per cent of surveyed francophone asset managers, who averaged $416 million of assets managed.
Average across all the survey respondents, including a couple of South African managers, was $4.1 billion in assets under management.
Optimism is also strong among asset managers surveyed in Mauritius, Morocco, Nairobi and Egypt. Nearly half of respondents manage assets with investment horizons over five years, another 23 per cent for three to five years.
President, African Securities Exchanges Association (ASEA), Dr. Edoh Kossi Amenounvé, said the results of the survey confirm the high level of professionalism of African fund managers using world-class standards and criteria in their decision-making.
“This is really reassuring for the success of the AELP initiative,” says Dr. Edoh Kossi Amenounvé, President of ASEA.
The poll evaluates the appeal of different investment markets in the AELP, which brings together seven leading African securities exchanges to boost trading, investment and information links.
AELP is procuring a technology platform to link stockbrokers, so that a broker on one exchange can send investors’ orders to an executing broker on another exchange for execution.
The AELP is a joint initiative by the ASEA and the African Development Bank (AfDB) to unlock Pan-African investment flows, promote innovations that support diversification for investors, and address depth and liquidity in the markets.
It is funded by the Korea-Africa Economic Cooperation (KOAFEC) Trust Fund through the AfDB.