The Stock Exchange of Mauritius (SEM) provides a regulated market place where securities of listed companies and other financial products can be traded by means of innovative, world-class systems and services. SEM also provides listed companies with a platform to raise capital through rights issues and/or new issues to finance their growth and expand their business.

The activities of the SEM are regulated by the Financial Services Commission.  SEM currently operates the Official Market, the Development & Enterprise Market and the Debt Board. 

Shares, also referred to as equities or stocks, represent ownership of a company along with other shareholders. When you buy shares in a company, you are buying a part of that company. Ownership of a company’s share entitles you to a proportion of a company’s profits which can be given to you as dividends. Another form of return relates to the increase in the price of the company’s shares called capital gains.

An investor can acquire shares in two ways:

1. Through the purchase of shares on offer in an Initial Public Offering (IPO). The company uses the money received from selling these shares to develop their business.

2. Through the purchase of shares on the Stock Exchange.

The value of the shares of listed companies is often related to their financial results and performances. The more profits a company makes, the more investors are willing to buy its shares. As share prices respond to the law of demand and supply, the share price of good-performing companies tend to go up over time, while those of bad-performing companies tend to drop over time.

Share prices also react to other factors such as interest rate movements, macro-economic data and international economic news. Markets react speedily and unpredictably to rumors of war, government changes, public sentiment and opinion. Prices can rise as quickly as they fall. You may not be able to predict these forces, but by analysing and understanding them, you may be better equipped to face market swings.

A market index is a statistical indicator of market performance. Market Indices often serve as barometers for a given market and benchmarks against measured financial performance.

An index can track the performance of the overall market or it can have a sectoral inclination, focusing on the performance of stocks operating within specific sectors.

There are five market indices at SEM.

1. SEMDEX, the All-Share Index, is an index of prices of all listed stocks where each stock is weighted according to its share in the total market capitalisation. It is a weighted index and each stock is weighted according to its share of the total market capitalisation. Thus, changes in the SEMDEX are dominated by changes in the prices of shares with relatively higher market capitalisation. In its computation, the current value of SEMDEX is expressed in relation to a base period, which is chosen as the 5th July 1989, with an index of 100.

The Index formula is as follows:

SEMDEX = (Current market value of all listed shares/ Base market value of all listed shares) X 100
 

where the market value of any class of shares is equal to the number of shares outstanding times its market price.

The base value of listed shares is adjusted to reflect new listings, rights issues and other capital restructurings.

2. SEMTRI, the Total Return Index, which besides capturing the price movements of listed stocks, common to the already published all-share index SEMDEX, incorporates the added feature of providing investors, in general, and long-term investors like pensions funds, in particular, a good measurement of total return which combines both capital gains/losses on listed stocks and gross dividends obtained on these stocks since the inception of the local stock market on 5 July 1989. Gross dividends are assumed to be re-invested in the stocks underlying the capital index, SEMDEX.

3. SEM-7 index comprises the seven largest eligible shares of the Official Market, measured in terms of market capitalisation, liquidity and investibility criteria. It has been designed to meet international standards and provide an investible benchmark for domestic and foreign market participants.

4. DEMEX is a capital-weighted index which tracks the price movements of the shares listed on the DEM.

5. DEMTRI is a total-return index for the DEM market.

Investing on the stock market provides you with one of the various opportunities to achieve your long-term financial goals. It is advisable that you invest the money that you can afford to live without for a relatively long period of time. Your investment needs time to grow. The amount of money you choose to invest on the stock market depends on your age, your risk profile, your investment objectives, the amount of savings you have set aside and that you may not need and the proportion of that saving that you are willing to commit to shares. If you have any doubt about how to allocate your savings among different types of investible assets you may need to contact a financial adviser.

Although past performance is no indication of future performance, historical data on SEM indicate that investments in many listed companies have, over the long-term, outperformed many other types of investments and provided annualized total returns in excess of inflation.

Investing in shares can also be used as a diversification strategy which allows you to place your savings in different saving options, thereby, spreading your risk and avoiding to keep all your savings in one basket.

Risk is the possibility of losing part or all of your initial investment or the likelihood of making a profit that is less that what you anticipated.

Like any other investment, share investment carries an element of risk as share prices fluctuate as economic and market conditions change. Investing in shares is riskier than investing in bonds or depositing cash in the bank. More conservative investors are generally prepared to ride out temporary slumps knowing that, over time, prices are likely to increase again.

Before venturing into the market, confirm whether you have a lump sum for shares or if you will pay monthly installments for your stock market investments. It is desirable to set objectives before committing your savings to share investment:

- Is income a priority, or are you looking for long-term capital growth?

- What is your personal risk profile?

- How much can you safely afford to lose in the event of a stock market downtrend?

- How long will you be prepared to wait for the market to stabilize?

Your answers will determine the extent of your capacity to balance risk with reward. Either way, the golden rule is to invest only as much as you can comfortably afford after meeting your personal and household expenses.

- Be sure not to invest your money in only one security but rather invest in a variety of securities. This process is called diversifying. By diversifying you spread your risk across a range of sectors, companies and products. A loss in one security can be reduced by the profit in another security.

- Broaden your knowledge by regularly reading financial literature; attending financial courses and seeking qualified investment advice.

- Only invest the money that you feel you can afford to lose.

- In the long term, share prices generally increase and investors can sell them for more than what they had paid for them.

- Investors can receive income (dividends) from the companies who pay a portion of their profits to their shareholders.

- Investing in shares is riskier than keeping your money in bank deposits- share prices go up AND down.

- Unexpected happenings in the economy or in a particular company may result in share prices suddenly increasing or decreasing.

- Although stockbroker advice is a very important tool in investing, the final investment decision lies with you.

In order to trade on SEM, you should open a securities (CDS) account with a licensed investment dealer, i.e. a stockbroking firm. The licensed broker will be your main point of contact and will do the needful with regards to all your KYC requirements. A stockbroker is a well qualified person who buys and sells securities and offers investment advice to investors. Investors have to go through one of the stockbroking firms licensed by the SEM, in order to be able to invest on SEM. To contact a licensed investment dealer (stockbroker), please click on www.stockexchangeofmauritius.com, go to "About SEM" and double click on "Members".

SEM provides an internet platform called iNet (accessible from the SEM website’s welcome page) which allows investors to have real-time access to the automated trading system of the SEM using a web browser and an internet connection. The following functionalities are available to investors through iNet for you to place your order and trade online:

- Viewing real time market data (security prices, volumes, turnover, indices etc)

- Viewing 5 best bids and offers in the order book for each security

- Placing orders that must be electronically validated by the stock broking company before getting into the order book

- Monitoring the status of orders

- Viewing executions

- Online access to CDS Accounts

Prior to registering as an iNet User, you should have a CDS Securities Account opened through an Investment Dealer. A list of Investment Dealers and their contact details can be obtained at the following address: http://www.stockexchangeofmauritius.com/members. You should then submit your iNet registration form to the Investment Dealer which shall then forward it to SEM.

Based on the information provided in the iNet registration form and after the application has been accepted, SEM will provide to you, by registered post, your Username and Password, which will enable you to log on to iNet through the SEM’s web page (http://www.stockexchangeofmauritius.com/) and place buy and sell orders in respect of equity instruments on the Official Market and Development & Enterprise Market.

Note that the Use of iNet is subject to the Terms and Conditions of Use of iNet ('Terms'). You must, therefore, ensure that you have obtained and read a copy of the Terms before you use iNet. Also, if the investor is not experienced, it is not advisable to opt for online trading, as it could be daunting and riskier. While shares can be traded online, investors still have to open an account with a broking firm as explained above. This method of trading is not possible outside of SEM's licensed stockbroking network.

The first step to invest in companies listed on SEM is to approach a licensed stockbroking firm with SEM.

- Stockbrokers are investment dealers and licensed members of SEM who trade securities on behalf of clients as investors cannot invest directly on the exchange. They also provide advice on stock exchange investment issues. Brokerage fees are charged when investing in shares.

The brokerage fees that an investment dealer may charge clients for dealing on their behalf are as follows:

SEM constantly monitors all trading that has been carried out by stockbrokers to ensure that they are acting within its rules. This, in turn, provides investors with peace of mind.

Stockbroking firms have research departments and publish regular reports advising on which shares to trade, as well as economic and political trends.

In order for a stockbroker to buy shares on your behalf, you are required to have sufficient funds in opening a CDS account. On completion of a transaction you will receive confirmation from your stockbroker that the trade was completed and that the share will be registered in your name and kept electronically on your behalf. An instruction to sell shares will only be acted upon once your stockbroker is satisfied that shares are held electronically on your behalf.

Buying shares through stockbroking firms affords investors protection, as these firms are required to conform to SEM rules and regulations.

Investors should remain updated on the market and companies whose shares they own. Stockbrokers can assist in explaining market behaviour, however, some of the factors responsible for growth or decline in share prices such as, company profits, growth in the local economy and international economics, are easy to follow in the press and on SEM's website. It is always advisable to invest savings and not borrowed funds, and to invest in businesses you understand.

Lastly, again get educated on the subject of stock market investment, and after going through this booklet, please explore other publications available on SEM's website. There is also a wealth of financial literature available free on the internet, besides stock market articles in local newspapers and magazines as well as research papers by your stockbroker. Last but not least, speak to your stockbroker and /or financial expert for any advice before investing.

- Share investment is only for rich and famous; the fact is, share investment is for everyone who wants to invest in the market and has disposable income or savings.

- To invest in shares, an investor needs to have a high level of education; you are not required to have any form of formal or specialised education to invest and grow your savings. However, investors could do well by following events in the stock market and news about the companies they have invested in.

 - An investor can make a good profit over night

- Stock market investment is about long term investment.

- It is essential that you do research before buying any shares on the market. Understand how money is made from share investment and regularly review your return on investment.

- Be an information-hungry shareholder and strive to know more about the companies whose shares are in your portfolio.

- Invest in what you know and increase your knowledge by reading financial publications regularly. Reports about listed companies and other financial articles which influence the performance are often published in these publications.

- Do not borrow in order to invest. The money used to buy shares with should not be needed in the short term. Exercise patience, but do not get married to your share.