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Implication behind EA bourses’ integration
2006-04-19 12:23:56
By Mireny John
As the East African Community’s Council of Ministers is pondering over a protocol for free movement of labour among the three partner states, an equally important integration dimension has been taking place.
The region’s capital markets are also heading the way of integration.
The process of integrating region’s capital markets kick-started ten years ago with the formation of the East African Securities Regulatory Authority (EASEA).
A recent report indicates that before the end of the year, the Dar es Salaam Stock Market (DSE), the Nairobi Stock Exchange (NSE) and the Uganda Securities Exchange (USE) will be integrated through automated trading systems that would allow electronic trading.
In the upshot, beginning next July, the region will, for the first time, witness mass cross listing to usher in era of advanced stock trading.
EASEA has agreed that only companies listed under the main investment market segment (MIMs) would first be encouraged to cross list.
At a later stage, those in the alternative market segment (AIMs) would come over board.
Going by the strength of Kenya’s number of companies already listed on NSE under MIM, the direction of cross listing is most likely to rainbow from Nairobi to either DSE and USE. NSE hosts 30 companies while the rest have six each.
Here comes yet another opportunity for raising capital open to the citizens of the three East African countries.
The possibility of buying Initial Public Offers (IPOs) and shares of companies in the three markets is now getting a leeway.
The cross listing, seen by analysts as an antecedent to the region’s total integration, should not be seen as a threat to anybody, simply because of paucity of companies listed under MIMs.
When, for instance, Kenyan companies cross list to DSE, that implies an expanded stock trading opportunity and associated risks to Tanzanians, in addition to the possibility of benefiting from share earnings.
Likewise, brokers also stand to gain from increased participation of shareholders at the bourse.
Mass cross listing comes in the wake of reports highlighting growing trends in market activity in terms of market capitalization and index performance.
By extension, this is a reflection of the region’s monetary policy stability and monitoring capacity by the respective central banks.
In this upbeat mood, cross border IPOs and listing are new concepts and practices in East Africa, and so public education and awareness campaigns have to to be conducted professionally.
The primary aim is to stave off unwanted fears about cross listing and to inculcate the culture of risk absorption.
Presently, Kenya three companies have taken the lead in cross listing to three stock exchanges.
A track record of superior corporate governance is cited as one of their key strength for successful cross listing. Our listed firms should be on the look out.
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