Thursday, October 4th, 2007


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By NANCY MWAPE

LuSE abandons plans to link itself to JSE

THE Lusaka Stock Exchange has abandoned an ambitious plan to link with Johannesburg Stock Exchange (JSE)- Securities and Exchange due to cost considerations.

 

Johannesburg Stock Exchange – Africa’s Largest

Last year, LuSE indicated that it was scouting for US$1.1 million to link its operations with JSE Securities and Exchange by this year.

LuSE had also said the World Bank’s International Finance Corporation was studying LuSE’s plan and would fund the project.

But responding to a press query, LuSE general manager, Beatrice Nkhanza, said plans to link with JSE had been abandoned for various reasons among them the cost considerations.

“Plans to link LuSE to JSE have been abandoned for various reasons.

LuSE therefore is going it alone…by sourcing and financing of the system, just like Nairobi, Dar-es Salaam and Botswana,” she said.

Mrs Nkhanza however pointed out that LuSE was in the process of sourcing and installing an automated system and was currently consulting.

She stated the automated system would be operational sometime next year.

Mrs Nkhanza said in the region, only Namibia Stock Exchange was linked to the JSE Securities and
Exchange.

The aim of linking with JSE Securities and Exchange was to integrate network of national securities market in the region.

In 1997 at Livingstone’s Sun hotel, a committee of Southern Africa Development Community Stock Exchange was formed to integrate stock exchanges, make markets liquid and improve their operations.

By last year September, member States that included South Africa, Botswana, Namibia, Malawi, Mozambique and Zambia had harmonised listing requirements.

Getting LuSE linked with JSE securities and Exchange was expected to create a central point for inflow of foreign portfolio investment and enhance LuSE’s exposure to investors.

Other expected benefits included improved liquidity across multiple markets and LuSE being able to be seen on the London Stock Exchange via JSE Securities and Exchange.

Zambia Daily Mail

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Seattle Times staff columnist

Our relationships with the rest of the world need some updating.

Things are changing. A large delegation from Zambia was in Seattle this week making a case for investment, not charity, as the cure for poverty.

It’s an argument many in Africa have been making for years, usually in the other Washington.

While few in the world’s leading capitalist nation are biting, China is pouring money into the continent in search of influence and profit. In Zambia, the Chinese invest in mining, retail and construction.

Viewed from the U.S., Africa seems a solid mass of disease, war, unstable dictators and rampant corruption.

The Zambian delegation, including the country’s president, argued that this view is full of stereotypes that do not apply to their country.

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Zambia is a country of 12 million in southern Africa. Copper mining is central to the economy, but tourism, manufacturing and agriculture are growing.

The Zambians were invited way out west to Seattle by the Initiative for Global Development, which believes eradicating deep poverty would eliminate many of the ills, including diseases and conflicts, that afflict the planet.

Members call themselves “business leaders working to end poverty.”

Getting people out of poverty is the right thing to do, but it also can be profitable for business and relieve governments in developed nations of numerous international headaches.

The U.S ambassador to Zambia has said a stable Zambia contributes to the U.S. goal of peace, democracy and economic growth in southern Africa.

IGD was founded three years ago by Bill Gates Sr.; Daniel J. Evans, the former senator and governor; former EPA administrator Bill Ruckelshaus; Weyerhaeuser heir Bill Clapp; and John Shalikashvili, former chairman of the Joint Chiefs of Staff.

The delegation also scheduled meetings at Starbucks, Microsoft, Boeing and elsewhere.

levy_combine300.gifAt the session I attended, the president, Levy Mwanawasa, and his ministers made a compelling case for investment. How’d you like to pay no taxes on business earnings?

They talked about their new zero-tolerance policy on corruption and their commitment to democracy, stability and economic growth.

And, said the minister of commerce, trade and industry, the weather is perfect.

What are we waiting for?

Well, actually, the weather isn’t perfect. It gets pretty hot there, and then there is the matter of infrastructure, and if they have cured corruption they are the only nation anywhere to have done so.

Zambia still has problems, but curing poverty would help solve them.

Business investment (not exploitation) is necessary.

Mwanawasa invited American entrepreneurs to visit and see that “the truth is the opposite of what you think is true.”

It’s not exactly the opposite, but Zambia seems to be at a point where investment could benefit Zambians and offer the U.S. new opportunities to make money and make friends.

Jerry Large’s column appears Monday and Thursday. Reach him at 206-464-3346 or jlarge@seattletimes.com.

Copyright © 2007 The Seattle Times Company

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The $64 billion question remains as to how Zambia can attract western investors … we at the Zambian Chronicle (in July this year) once detailed that as a nation, the country had serious competitors and we needed to get into these competitors’ pysche as well as those of the would-be investors’ to succeed.

In an article posted in the Washington Post, Tomoel Murakami Tse shades more light on what western investors are looking for before they can make our enterprise a destination for their investment dollars … thanks a trillion

For Further Reading Click Here … http://zambianchronicle.com/2007/07/26/116/

By Tomoeh Murakami Tse

Washington Post Staff Writer

Forget the emerging markets of China, Brazil, India and Russia. If you’re looking for that extra kick in your investment portfolio, you’ll have to venture to Latvia, Bangladesh, Namibia and Ivory Coast, according to a small but growing number of mutual fund managers exploring the front line of stock investing known as frontier markets.

In the past several years, many investors who put their money into emerging markets enjoyed annual returns of more than 30 percent, attracting capital from Japanese housewives and American pensioners.


Bangladesh's market rose 60 percent in the past year. The head of the exchange says its value will double next year, lifted by IPOs for state and private firms.

Bangladesh’s market rose 60 percent in the past year. The head of the exchange says its value will double next year, lifted by IPOs for state and private firms. (By David Greedy — Bloomberg News)

 

But as investments in Chinese retail companies and Indian tech firms become more mainstream, and as more analysts caution that such outsize gains are not sustainable, money managers are asking: Where next?

“A lot of hidden gems are no longer hidden,” said Hugh Hunter, head of global emerging markets at WestLB Mellon Asset Management. “Clearly, frontier markets are the next tier. . . . We have no option but to go forward in this area.”

So don’t be surprised if you start seeing unfamiliar stocks from far-flung places on statements from your emerging markets fund manager.

Aside from the need to keep looking for new investment opportunities, Hunter and others say, economic growth and development of the capital markets have turned some frontier markets into appealing, long-term investments for those with a healthy appetite for risk. Money managers view the frontier economies much as they did the emerging markets of a decade ago. They are hopping on airplanes to visit countries where as few as a half-dozen companies are listed on the local stock exchanges.

A handful of mutual fund firms, including Franklin Templeton and Baltimore-based T. Rowe Price, already offer individual investors exposure to the frontier markets via emerging market mutual funds. This month, T. Rowe launched the Africa & Middle East Fund, with investments in Kenya and Lebanon, among other places. As markets develop, T. Rowe said, the fund could potentially invest in Algeria, Botswana, Ghana, Kuwait, Mauritius, Namibia, Tunisia and Zimbabwe.

 

“We’ve seen a number of factors come together,” said Joseph Rohm, an analyst for the fund. “Africa is enjoying strong GDP growth. Inflation has halved over the last five years. . . . We’ve seen governments spend heavily on power, electricity, roads. For the first time ever in the continent’s history, that’s really happening.”The fund’s largest holdings include United Bank, the largest lender in Nigeria, which recently implemented reforms in the banking sector. The bank is expanding operations outside the country, T. Rowe noted.

There is no precise definition of what constitutes a frontier market vs. an emerging market. Some investors, for example, consider Israel and Korea to be developed markets, while others do not.

In general, frontier markets are smaller — fewer companies, fewer investors, less trading. There’s also less regulation, information on companies and transparency. The markets are considered to be in the nascent stages of development and even riskier than emerging markets, which, of course, are riskier than developed markets like the United States.

Think of it this way: While a money manager invested in an emerging market might worry about bubbles created by unsophisticated domestic investors, his or her counterpart in a frontier market might be concerned about a lack of local investors.

About 540 stocks are traded across 22 frontier markets, with a total market capitalization of $165 billion, according to an April report by Acadian Asset Management. By comparison, the market cap of just one Russian oil company, Lukoil, is about $70 billion, and more than 800 companies are listed on the Shanghai Stock Exchange, one of two exchanges in China.

Despite its size, a frontier market can reward investors handsomely. In the past three years, the Ukrainian stock market has returned 700 percent. It has risen about 160 percent in the past year, while the market in Slovenia gained 110 percent. Botswana returned about 90 percent, and Bangladesh advanced 60 percent. But not all are winners. The Jamaican exchange is down 4 percent this year, though it gained 150 percent in 2003 and 2004 combined.

The S&P/IFC Global Frontier Markets index, which covers the stock markets of 22 countries, gained 49 percent in the year ended Aug. 31. That compares with 16 percent for the Standard & Poor’s 500-stock index during the same period.

But numerous potential downfalls exist in frontier markets. One big concern is the lack of “liquidity,” or the ability to buy and sell stocks quickly. Hunter of WestLB Mellon said it recently took him close to a month to get out of a single position in a frontier market in Europe.

There is also the risk of wild fluctuations in foreign-exchange rates, which can unexpectedly lower the value of investments. The value of the peso in Argentina, for example, plummeted five years ago when the government was forced to devalue the currency during the largest foreign debt default in history.

Money managers have to ask themselves fundamental questions. “What are the rules that allow me to get in and out quickly?” said Alka Banerjee, vice president of global index management for Standard & Poor’s. “Is there a derivatives market which allows me to hedge my exposure? These are the kinds of infrastructure that a stock market needs for it to become basically more accessible to any global investor.”

One benefit investors should consider, noted Rohm of T. Rowe, is the frontier markets’ low correlation to developed markets, offering diversification to individual portfolios.

Many emerging markets fell during the turmoil sparked by U.S. mortgage and credit markets this summer. Not so frontier markets. One reason is that they often deal only in equities and bonds and don’t have derivatives markets. Many of the exotic securities backed by subprime mortgages, the catalyst for the credit crisis, are traded in derivatives markets. “They have no exposure to these sort of instruments,” Rohm said.

On the other hand, many frontier-market economies are dependent on commodities. While raw materials and oil have high prices now, volatile commodity prices and a reliance on commodity exports have been a source of risk for developing countries. But some frontier countries are widening the base of their economies.

Debt relief from the World Bank has freed up African governments to spend their money on infrastructure, said Rohm, a native of South Africa who has traveled extensively across the continent. The emergence of the middle-class consumer has created opportunities for consumer-oriented companies.

“It’s very visible,” said Rohm, who recently returned from a trip to Nigeria, Ghana, Kenya, Uganda and Zambia. Before, “you wouldn’t have seen people walking around with mobile phones. There are a lot of new cars on the road. You see new roads being built. You see new factories being built . . . managements are very happy to meet with investors. They’re producing regular financial statements, which allows us to do due diligence on these companies. ”

We have edited the above article to highlight important issue relative to an investor’s pysche … thanks a trillion