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Disparities delay stock exchange harmonisation

DISPARITIES between stronger and weaker stock exchanges could delay the formation of proposed regional standardised financial market listing rules.
A planned regional harmonisation exercise is pushing for listing requirements compatible with South Africa’s buoyant Johannesburg Stock Exchange (JSE).

The Committee of Sadc Stock Exchanges (Cosse) which met last month in Botswana said some listing rules of smaller exchanges may slow down plans to benchmark regional listing requirements against the JSE.
Zimbabwe’s ZSE, one of the smallest exchanges in the region, is only larger than the Swaziland Stock Exchange and Mozambique’s Bolsa de Valores de Mocambique in terms of market capitalisation, although the bottom-placed exchanges both have less than 10 listed companies trading on their respective bourses.
The local bourse which has 76 counters trading and worth US$3,1 billion is, however, twice smaller than the 15-counter Malawi Stock Exchange.
The ZSE represent a fraction of JSE’s US$800 billion market cap.
Sadc has 10 stock exchanges and one bond market with South Africa’s JSE being the largest in terms of market capitalisation.
“The disparities in the sizes of economies and markets have the tendency to create conflicting objectives and a low level of mutual trust and confidence that complicate progress towards integration,” Cosse said.
“For example, while the larger exchanges seek to meet rigorous international standards, smaller exchanges are more willing to make the compromises in rigour that would enable them to be competitive and attract listings.”
Cosse was established in 1997 as a private-sector initiative within the regional framework with objectives that included improving the operational, regulatory and technical underpinnings and capabilities of Sadc exchanges, encouraging the development of a harmonised securities environment within the Sadc region and maximising cooperation among the member stock exchanges.
ZSE CEO Emmanuel Munyukwi said he was tied up when reached for comment on Wednesday on the issue. Cosse, however, recommended that in order to keep the harmonisation exercise “manageable”, regional stock exchanges should exclude issues relating to debt markets in their pursuit of matching JSE listing rules.
Listing requirements for Sadc exchanges other than the JSE cover both debt and securities, but listing rules in South Africa only cover equity and equity-related securities.
“Rules pertaining to specialist companies and securities such as mineral companies, property companies, pyramid companies, investment entities and specialist securities have been excluded because of their questionable relevance across all Cosse markets,” Cosse recommended.
The ZSE updated its listing requirements in 1998 to harmonise with Sadc stock exchanges, based on the listing requirements of the Johannesburg and the London Stock Exchanges. The exchange last revised the rules four years ago amid reports that plans are underway to put more reforms.
The ZSE is currently enticing private mining companies and unlisted banking institutions to list on the exchange in an effort to increase “quality listings” on the exchange which has since the gazetting of controversial empowerment regulations in January retreated.


Bernard Mpofu

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