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Tuesday, July
21, 2020 / 05:58 PM / by NSE / Header Image Credit: Waystocap
Governance at the heart
of investment decisions of African fund managers
Governance,
good regulation and availability of market data and prices help African fund
managers decide on investing into other African markets, according to a survey
of 50 African asset-managers for the African Exchanges Linkage Project (AELP)
project. Key factors when they choose new markets are: market regulation (91%
of replies), followed by investor regulation and availability of market data
and prices (90% each).
Other top criteria that help fund managers choose where to invest are:
levels of dealing price, efficiency of execution and commission (86%), the
quality of companies and investment opportunities (also 86%), corporate, social
and governance criteria (84%) and availability of research (80%). Three
quarters of investors said they were reluctant to invest in small and illiquid
markets or where valuations are excessive. 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% of the surveyed Nigerian asset managers are optimistic about the
continent, with average assets of $364 million under management, followed by
85% 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 (80%
optimistic), Morocco (73%), Nairobi and Egypt (each with 65% of responses
optimistic). Nearly half (46%) of respondents manage assets with investment
horizons over five years, another 23% for three to five years.
"The results of this 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 African Securities Exchanges
Association (ASEA) and the African Development Bank 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 African
Development Bank.
The AELP exchanges are: Bourse Regionale des Valeurs Mobilières (BRVM,
integrating eight West African countries), Casablanca Stock Exchange, The
Egyptian Exchange, Johannesburg Stock Exchange, Nairobi Securities Exchange,
The Nigerian Stock Exchange and Stock Exchange of Mauritius.
Cross-border trading between the seven markets totalled $1.1 billion in
2019, and was at over $500 million in the first quarter of 2020, according to
the participating markets. The "African Listed Securities" assets across these
exchanges offers equities investments in more than 1,050 companies, including
Africa's most promising, profitable companies and global leaders. Investors
will also buy or sell bonds, exchange-traded funds (ETFs) and derivatives if
they are listed on the participating Exchanges.
ASEA supports African economic integration and the African Continental
Free Trade Area. The AELP will promote free movement of capital and investment.
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