Stock Exchange of Mauritius: Newsletter December 2017 INSIDE THIS ISSUE: 1 EXCHANGE NEWS: The Stock Exchange of Mauritius launches the SEM Bond index (SEM- BI) 2 INSIGHT: SEM interviews Kee Chong Li Kwong Wing, Chairman of SBM Holdings Ltd, in the context of the listing of the first Pan-African Depositary Receipt on the Exchange 4 SEM STATISTICS Publication of this newsletter has been done with reasonable care and diligence. However the Stock Exchange of Mauritius Ltd. makes no representations gives no warranty and disclaims all liability in respect thereof and shall not be held liable for any damage, loss or costs incurred resulting from any error in the information or any use of the said information. Appropriate independent advice should be obtained before making any investment decision.
1 EXCHANGE NEWS: The Stock Exchange of Mauritius (SEM) launches the SEM Bond index (SEM-BI) on 17th November 2017, with the total market capitalization of all debt instruments listed and traded standing at Rs 24.6 billion as of end-november In line with a number of initiatives implemented in recent years to improve its services to its stakeholders, the SEM launched the SEM-Bond Index, SEM-BI, on the 14 th of November 2017. Following substantive changes brought to the SEM s operational framework since 2010 in the context of its transformational move towards a multi-asset class international Exchange, the SEM has successfully attracted the listing of a growing number of debt instruments on its Debt Board. As of end of November 2017, the total market capitalization of all debt instruments listed and traded on the SEM currently stands at Rs 24.6 billion. The timing is, therefore, opportune to create a Bond index which will provide bond investors with a dynamic and measurable tool of the time-series performance of the bond index constituents. The launching of SEM-BI confirms the attractiveness of the SEM as a compelling capital-raising and listing platform for debt instruments. It will hopefully enhance the visibility of the debt market in Mauritius. The SEM Bond Index (SEM-BI) comprises rupee and foreign-currency denominated debt instruments that are listed and traded on both the Official Market and the Development & Enterprise Market (DEM) and will exclude structured debt products, zero coupon debt instruments and debt instruments that have a maturity of less than one year. It will be a market capitalization based index. Market capitalization of the underlying debt instruments will be based on their last traded prices. On its launch date on the 14 th November 2017, SEM-BI had an introductory level of 100 points at the opening of the market. The base market capitalization of the SEM-BI was equal to the total market capitalization of the underlying debt securities at market close on the 13 th of November 2017. SEM-BI is a rupee-based Index. It is calculated at market close on each business day and published on the SEM website and end of day SEM market data trading file. 2
2 INSIGHT: SEM interviews Kee Chong Li Kwong Wing, Chairman of SBM Holdings Ltd, in the context of the listing of the first Pan-African Depositary Receipt on the Exchange 1. The first Pan-African Depositary Receipt, African Export-Import Bank (Afreximbank) Depositary Receipt, was listed in USD on the Stock Exchange of Mauritius (SEM) on 04 October 2017. Can you briefly tell us the role of SBM Group, entrusted by Afreximbank in executing this important transaction? The listing of the Afreximbank s Depositary Receipts issued by the SBM Group is a symbol of the innovation strategy into which the SBM has engaged itself. To recall, it is a Grande Premiere in the history of African finance. In addition to being a landmark event, the listing of the Depositary Receipts brings double proudness to SBM since the capital raise of over USD 165 million of the Afreximbank s Depositary Receipts is the highest prelisting capital raise in Mauritius. The SBM was entrusted by the Afreximbank to undertake several role in this issue, namely to act as Transaction Advisor, Lead Arranger, Sponsoring and listing Broker, Depository, Registrar, Transfer and Paying agent and Custodian. To note that all these roles have been accomplished by the different subsidiaries of the SBM Group such as SBM Mauritius Assets Managers Ltd, SBM Securities Ltd, SBM Fund Services Ltd and SBM Bank (Mauritius) Ltd. 3
2. The structuring and issuance of Depositary Receipts is an addition to SBM Group s services. How does this innovating component addition, reinforce the position of SBM Group and Mauritius as important financial players in the region. Diversification and innovation are the growth drivers of the SBM Group. The issue of the Afreximbank s depositary receipts has been a new venture for the Group and through this issue, SBM has demonstrated that it possesses the capabilities, knowledge and competencies to provide new types of financial solutions and services while reaching new markets. This landmark event was also an opportunity for the Group to reaffirm its position as a leading financial institution in Mauritius but also to widen its horizon towards cross-border markets. Moreover, we are proud that Mauritius has been chosen as the partnering country for this deal through the Mauritius Stock Exchange. This issue again confirms Mauritius position as an International Financial Centre for the region. The choice of Mauritius is mainly because the island offers flexibility and tax efficient endowment to the issue and trade of Depository Receipt. Moreover, Mauritius is well positioned in the Asia-Africa corridor and is considered to be the financial hub for Africa. 3. This listing is a premier in Africa. How can market players in Mauritius in partnership with stakeholders in Africa, potentially create such innovative opportunities for the reinforcement of trade, investment and development across the African continent and the deepening of Africa s capital markets? Depository Receipt as a quasi-equity product is popular in developed and emerging markets. Depository Receipt enables the company to access jurisdictions where off-shore investors do not have access to investing in domestically listed entities. In the case of Afreximbank which is not a listed entity in any jurisdiction, it is done through issuance of Class D shares whose price discovery is from the NAV of the book value. The launch of this innovative product and listing of same in Mauritius is a good initiative for the SEM in particular and for the Mauritian financial services sector in general. This adds to the emergence of Mauritius as gateway for accessing investors to fund economic capacity building and expansion of Africa. This is seen as a first & major step not only to promote equity linked investments into Africa but also to expand scope for primary debt capital market to provide leverage to equity capital raised through Mauritius. It is indeed a major development and if it is nurtured well, it would expand contribution of Financial Services sector to the GDP of Mauritius and generate employment and revenues to the Government. 4. SBM Group is at the forefront of innovation relating to finance, technology and customer service. Can you briefly tell us vision for SBM Group behind the transformational strategic changes currently underway? SBM is a majority state owned and public listed group with commitment to build and contribute to the economic prosperity of Mauritius and the social well-being of its people. Towards this agenda, there is need for the SBM to grow outside Mauritius through its internationalization strategy and to bring outsiders into Mauritius in its agenda to build Mauritius as gateway & expressway between Asia and Africa. The contribution from India and China will be significant in the Africa growth story, and Mauritius is best positioned to facilitate this journey and SBM will emerge as a catalytic force in this strategy. Already, SBM was instrumental to raise USD500 million from EXIM Bank of India to invest in public-private partnership projects in infrastructure, transport, housing and energy. SBM was also the 4
first banking partner, with the financial arm of Chinese giant Alibaba, to offer Alipay services through our digital platform. 5. An analysis of global trends and industries which are likely to be disrupted by digital technology and big data in the near to medium term, reveals that financial services, is one of those. In the new era of cloud, digital technology and blockchain, what do you believe Mauritius needs to do, with a view to adapting to such changes? In this era of ever new emerging technologies, Mauritius needs to immediately scale up in skill building around the 3 rd generation technologies of Social Mobility Analytics and Cloud. The country also needs to invite and facilitate international and local entrepreneurs to setup their enterprises here around innovation driving platforms like Blockchain, Artificial Intelligence, Robotics, Cybersecurity. These skills and enterprises will provide a huge impetus to the Financial services industry in Mauritius to achieve and deliver cutting edge financial products and services to not just the Mauritian consumers but to the Africa continent and global consumers as well. Banks abroad are already adapting to these disruptions as it has become a question of survival. Indeed, the payments space currently is being heavily impacted with concepts like digital money and demonetization. This means that Bank Branches might not be required anymore to provide cash services. Contactless payments are becoming the norm and accounts transfers are being done through a mobile phone, anywhere, anytime. Funding platforms and funds market places are becoming increasingly common where consumers can broadcast their financial needs and lenders can engage directly with specific terms on loans. This cuts the need to go to a Banking institution for funds availability and these loan terms are better than the commercial banks. Internationally, Banks have put up Incubators where projects can be developed with an angle to include the Bank as an investor or a background facilitator. The Rise by Barclays or The Village by Credit Agricole are typical examples. The advent of Open Banking standards can help facilitate the Banking Landscape Transformation. Banks are also investing in the shareholding of startups hoping that they will be part of tomorrow s financial world, however, it is a gamble as most startups do fail within a short period of time. The golden one will, undoubtedly, cover the costs of the failed ones. The game is to get that golden startup. 5
4 SEM TRADING STATISTICS: Official Market Data 6
Development and Enterprise Market Data 7