Major African exchanges have started discussions on a cross-border framework that will enhance listing of Exchange Traded Funds (ETFs) across the exchanges.
The listing of ETFs across many exchanges, otherwise known as cross-listing, will lead to improved liquidity on the African exchanges. Discussions are currently underway between market participants in Nigeria, Kenya and South Africa to launch the cross-listing of ETFs.
Director, Capital Markets, Johannesburg Stock Exchange (JSE), Donna Oosthuyse, said with the cross listing of ETFs, investors will have exposure to a diverse range of top performing Nigerian, Kenyan and South African companies in a convenient and cost effective way; and the cross-listings of ETFs will also improve the liquidity of Africa’s largest stock exchanges.
ETFs are a collection of equities, commodities or bonds bundled together in a fund to ensure that investor risks are evenly spread across this range of securities. ETFs are only written off specific index-related securities that are listed on a stock exchange, and this makes it possible to invest in a diverse range of securities through a single exchange traded product.
The concept of cross-listing an ETF is the same as cross listing a share, or listing it on more than one exchange. It provides domestic investors with access to opportunities from another market, in the convenient and cost effective form of an ETF.
“ETFs are one of the fastest growing asset-class categories in the world. By collaborating with Africa’s largest stock exchanges, we hope to spearhead this trend in Africa,” Oosthuyse said.
He explained that the advantages for companies included in the ETF indices, and for the exchanges from whence they come, are that ETFs need to be ‘fully covered, which means that the asset manager that is managing the ETF portfolio has to buy and sell the underlying shares on the home exchange, depending on the activity of buying and selling of the ETF.
goals.
“ETFs are becoming attractive to many investors offering them portfolio diversification and reduce cost of investing. We are proud once again to be collaborating with reputable exchanges in Africa to bring this new and exciting investment opportunity to bolster trade across multiple markets,” Haruna Jalo-Waziri said.
As part of an on-going effort to deepen and promote liquidity, choice of products and investor interest across African markets, the JSE and the African Securities Exchanges Association (ASEA), supported by the World Bank Group, will be hosting the third Building African Financial Markets Seminar from 16 – 18 September. The conference will gather key representatives from stock exchanges, regulatory bodies, stockbroking firms and other market participants from several African countries, where ideas on how to grow Africa’s capital markets will be discussed.