Heidi Raubenheimer, PhD, CFA, is head of Journal publications at CFA Institute. Experienced Board Member with a PhD focused in Business Management and Administration from University of Stellenbosch.
CFA Institute has examined Africa’s 10 largest capital markets in a major report compiled by Heidi Raubenheimer, CFA, our senior director for journal publications. Here we highlight key developments in two countries on the north-east and north-west tips of this vast continent: Egypt and Morocco
Download the full report here.
Egypt reforms steady the nerve of foreign investors
As a result of economic reforms, Egypt’s sovereign ratings have improved, with Moody’s, Fitch, and Standard & Poor’s each upgrading the country since 2013.
Key economic indicators in the country – whose rapidly growing population hit 100 million in February 2020 – are pointing upward, too: in the financial year (FY) ending 30 June 2019), real Gross Domestic Product (GDP) growth reached 5.6 per cent, up from 5.3 percent in FY18.
The reforms have steadied the nerve of foreign investors: foreign investors’ participation in IPOs doubled between 2016 and 2018.
Liquidity in financial markets has been improved through an IPO programme, a new market maker mechanism and extension of intraday trading from 104 to 160 stocks. The Egyptian Stock Exchange (EGX) has also allowed greater use of stock splits and margin trading for exchange-traded funds (ETFs).
The measures have helped gain international recognition for the EGX. It holds the chair of the Arab Federation of Exchanges and of the Working Committee of the Federation of Euro-Asian Stock Exchanges and is a founding member of the Sustainable Stock Exchanges initiative.
To further drive trading, the EGX plans to allow new products, such as financial and commodity derivatives, to be listed. It is also in the process of launching a fixed-income trading platform and instituting software development support for its members.
Large institutional investors dominate in ambitious Morocco
Since the early 1980s, when it embarked on an economic programme supported by the International Monetary Fund, the World Bank, and the Paris Club of creditors, Morocco has signalled it is open for business with the outside world.
The country, with a population of more than 36 million and bordering the Atlantic Ocean and the Mediterranean Sea, has privatised some sectors, developed a stock exchange with modern market infrastructure, created a regulatory body, and set up a central depository and payment system.
In 2016, the Casablanca Stock Exchange (CSE) was demutualised and is now owned by shareholders, including banks, insurance companies and brokers. In 2018, foreign investors held 33% of the market capitalisation.
Participation in Moroccan financial markets is dominated by large institutional investors. Asset management is well developed with assets under management standing at nearly 50% of GDP.
The Moroccan fixed-income market has grown steadily, although it is still dominated by government bonds. The equity market, meanwhile, has grown from a capitalisation of USD 14.8 billion in 2000 to USD 60.9 billion at the end of 2018. Banks represent the largest portion at 34%, followed by telecoms at 21%.
Morocco’s rapid development has fuelled its ambition to become the financial hub of Africa, with the CSE now a couple of years into a development plan for 2018–2021 called ‘Ambition 2021’.
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About the report
Our tales of African capital markets’ history and future reflect the journey of CFA Institute: from a lunch group in New York City in 1937 to a diverse collection of 170,000 members and 157 societies worldwide in 2019, united with the purpose of leading the investment profession globally for the ultimate benefit of society.
Some of Africa’s exchanges were established in early colonial times. South Africa led the way on the heels of the diamond and gold rush, followed by Zimbabwe, Egypt, and Namibia (a German colony at the time) – all before 1905. Some didn’t outlive the commodities rush but others are still thriving – substantially diversified and modernised.
Some capital markets were established more recently, and their development tells of independence and nation-building: Nigeria in the 1960s; Botswana, Mauritius and Ghana in 1989; Namibia post-independence from South Africa in the 1990s. Others, particularly the East African exchanges, are new and leapfrogging toward greater participation.
All tell of how regulation, trading technology and fintech are enabling fairer, faster and lower-cost participation in finance and investment for more market participants.
The CFA Institute Research Foundation brief was developed in conjunction with the African Securities Exchanges Association (ASEA).
Egypt / EGX R&D Division
Gehad Hussein, Managing Editor, Business Forward
Mohamed Selim Tantawy, Deputy Manager – R&D, Egyptian Exchange
Adil Hlimi, Managing Editor, Boursenews.ma
Badr Benyoussef, Chief Development Officer, Casablanca Stock Exchange
Image Credits: Getty Images/Bruce Yuanyue Bi