SEM at a glance
The Stock Exchange of Mauritius Ltd (SEM) was incorporated in Mauritius on March 30, 1989 under the Stock Exchange Act 1988, as a private limited company responsible for the operation and promotion of an efficient and regulated securities market in Mauritius. Since 06 October, 2008, SEM became a public company. From the teetering steps of the early days when trading took place once a week for a mere 5 minutes through the open-outcry system, when the settlement cycle of a transaction exceeded two weeks, and when the total value traded during the first six months of operations barely exceeded Rs 15 million, the SEM has come a long way. The SEM initially started its operations with the Official Market only with five listed companies at that time and a market capitalisation of nearly USD 92 million. The size of the market has grown from a market capitalisation to GDP ratio of less than 4% in 1989 to a current market Cap/GDP ratio exceeding 75%, in an economy that has witnessed a 5% average growth rate during the last 25 years.
SEM established a Central Depository System back in 1997, operated by its subsidiary, the Central Depository & Settlement Co. Ltd, to provide centralised depository, clearing and settlement services. SEM became the first Exchange in Africa in June 2001, to move to a fully automated and electronic stock market infrastructure. Whilst the stock market was initially opened to foreign investors following the lifting of exchange control in 1994, today international investors have become key participants to the SEM’s markets. Local investors account for about 55 % of the daily trading activities, and foreign investors account for the 45 % remaining. 75 % of that local volume is generated by institutions like mutual funds, pension funds and insurance companies. It should be noted that foreign investors do not need approval to trade shares, except for the holding of more than 15% in a sugar company. Foreign investors benefit from numerous incentives such as revenue on sale of shares can be freely repatriated and there are no withholding tax on dividends and no tax on capital gains.
The Stock Exchange of Mauritius operates two markets: the Official Market and the Development & Enterprise Market (DEM) with 11 investment dealers operating on the Exchange. Currently, there are 51 companies listed on the Official Market representing a market capitalisation of nearly US$ 9.5 billion as at 31 January 2017. The DEM was launched on 04 August 2006 for mid-cap companies and there are presently 43 companies listed on this market with a market capitalisation of nearly US$ 1.3 billion as at 31 January 2017. SEM possesses a multi-currency listing and trading platform, which is also open for dual-currency trading and can list, trade and settle equity and debt products in USD, EUR, GBP, ZAR besides the local currency MUR. The SEM today offers investors efficient exposure to a variety of asset classes and indices (for instance, the S&P Global Property 40 Index, the Vanguard S&P 500 ETF and the ZyFin India Sovereign Bond Liquid Index) through the ETFs listed on its platform.
SEM’s quarter century of history is therefore one where the Exchange has constantly strived to break new grounds to overcome the structural constraints of an island economy where the universe of products, investors and market participants is relatively restricted. Over time, the Stock Exchange of Mauritius acted as a powerful value-creation platform for listed companies and has played an important role in the democratisation process of the Mauritius economy by enabling more than 100,000 retail investors to participate in the growth story of a number of listed companies. The number of listed issuers on the SEM’s markets has grown from 6 local issuers in 1989 to 164 securities (including 115 local and 49 foreign securities) by end-2016. And since 2009, the SEM’s multi-currency platform has been used by listed issuers to raise USD 4.2 billion to fund their growth and development. Out of these issuers, some international issuers which are also dual-listed on other African Exchanges, have turned to the Mauritian Exchange to raise capital from US and EU investors in USD and GBP.
Since 2005, SEM is a full-fledged member of the World Federation of Exchanges (WFE), a central reference point and standards setter for exchanges and the securities industry in the world. In March 2010, the SEM was also designated by the Cayman Islands Monetary Authority (CIMA), an Approved Stock Exchange. The CIMA recognition undoubtedly raises the profile of the SEM as a well-structured and properly regulated Exchange and enhances SEM’s position as an attractive Listing venue for global and specialised funds. With effect from 31 January 2011, SEM has also been designated by the United Kingdom’s Her Majesty’s Revenue and Customs (HMRC), as a “recognised Stock Exchange”, as a result of which, securities traded and listed on the Official Market of the SEM meet the HMRC interpretation of “listed” as set out in section 1005 (3) (a) and (3) (b) Income Tax Act 2007. SEM is also regarded as a ‘recognised Stock Exchange’ for Inheritance Tax purposes. This designation confers several potential benefits for SEM. In the first place, UK pension schemes will be permitted to hold securities listed on the Official Market of the SEM, giving companies and funds listed on SEM access to a larger market of sophisticated, well-capitalised investors. The designation reinforces SEM’s attractiveness as a listing venue for global funds and specialized products. Securities listed on the Official Market of the SEM may be held in tax advantaged Individual Savings Accounts (ISA’s) and Personal Equity Plans (PEP’s) by UK investors. Holders of debt securities satisfying the Eurobond exemption and listed on the Official Market of the SEM are exempted from withholding tax on distributions underlying these debt securities. Inheritance tax advantages may accrue to UK holders of securities listed on the Official Market of the SEM.
SEM is today connected live to a top bracket of global vendors, enabling both retail and institutional investors worldwide to follow our market on a real-time basis. Investors, wherever they are sitting in the world, can also follow our market on a real time basis and seize investment opportunities on a real time basis through SEM's website. More importantly, the coverage of SEM’s data by global data vendors is a powerful marketing medium to enhance SEM’s visibility internationally and put the Exchange on the radar screen of a wider spectrum of institutional investors, thus attracting more foreign investor interest on our market. Similarly. the growing interest from international investors in recent years, has prompted well-known Index and Data Providers like S&P, Morgan Stanley, Dow Jones and FTSE to include our stock market in a number of new indexes they launched recently to track the evolution of some key frontier emerging markets.
Since 2009, the SEM embarked upon a fundamental reorientation of its development strategy to move away from its historical equity-centric domestic exchange focus to a multi-asset class international Securities Exchange status. SEM’s growth rests on the Exchange’s ability to attract the listing and trading of international products on its platform, hence the need to constantly introduce differentiating changes to our regulatory set-up with a view to improving our competitiveness as a listing and trading platform for international products and overcoming the structural constraints inherent to a small jurisdiction. This is why, over the recent years, in line with its internationalisation strategy the SEM revised its listing framework nearly every year to introduce new Rules for the listing on its multi-currency platform (USD/EUR/GBP/ZAR) of a variety of new products, such as Global Funds, Depositary Receipts, Mineral Companies and Specialist securities (including Global Business Companies (GBC), Specialist Debt instruments, Exchange Traded Funds (ETFs), Exchange Traded Notes and Structured Products).
2010 - Revamping of the Listing Rules to cater for the listing of Global funds (including collective investment schemes, specialised funds, real-estate funds and other focused fund structures).
2011 - Introduction of new Rules to cater for the listing of Global Business Companies and specialist debt instruments targeted towards qualified institutional and retail investors, including Eurobonds.
2012 - Introduction of new Rules to cater for the listing of Depositary Receipts and Mineral and Exploration companies.
2013 - Introduction of new Rules for the listing of Exchange Traded Funds.
2015 - Introduction of new Rules for the listing of Exchange Traded Notes and Structured Products.
2016 - Fast track listing process to entice international issuers to list on SEM + Revision of framework for capital-raising, in order to simplify the exercise and making the listing of newly issued shares more efficient and less time-consuming.
The SEM has during the last five years been working closely with local and international service providers to introduce new international products for the benefit of our investors. In 2015, SEM became the first Exchange in Africa to list a CoreShares S&P 500 ETF and a CoreShares S&P Global Property ETF. These two international products have the merit of offering to SEM's local retail and institutional investors access to 500 of the largest international companies and 40 of the well-established international companies involved in the global real-estate sector. These two innovative listings was followed by the listing of the first ever ETF tracking Indian Sovereign bonds in June 2016. Similarly, in 2016, the SEM became the first African Exchange to list a Masala Bond (a rupee-denominated bond issued outside of India by an Indian company).
Another important addition to SEM’s innovative drive relates to the introduction of dual-currency trading in 2016 on international products. The objective is to offer investors the option to trade securities that are currently only traded in foreign currency, in MUR as well. With this facility, investors who hold securities denominated in foreign currency have the choice to trade and settle their securities either in foreign currency or in MUR. This initiative is expected to boost trading and liquidity in international products and global business companies that are listed on SEM, thereby enhancing the attractiveness of the Exchange as a listing and trading platform for these issues.
Earlier on in September 2016, the SEM also added two new indices to its suite of indices; namely the SEM-All Share Index (SEM-ASI) and the SEM-VWAP Index. SEM-ASI is an index which will track the price performance of all companies listed on the Official Market, including the foreign-currency denominated companies, provided they meet the free-float requirements of the SEM. The creation of SEM-ASI was inspired by the listing of a growing number of Global Business companies on the SEM. These companies have not only grown in size but they have also been involved in appreciable trading activities. It therefore became opportune in 2016 to start tracking their price performance by including them in a new index. SEM-ASI not only increased SEM’s market capitalisation since September 2016, but it also today reflects the real size of the Exchange and helps to improve its visibility as an attractive capital-raising and listing platform for foreign currency denominated companies. Whilst, the SEM-VWAP index partially helps to neutralise index fluctuations triggered by small volume trades from time to time. The introduction of SEM-ASI triggered some incidental changes to the SEMDEX which since then, tracks only rupee-denominated companies listed on the Official Market. Earlier on, back in October 2014, the SEM replaced the SEM-7 Index by the SEM-10 Index. The rationale for the creation of the SEM-10 Index is that the underlying changes in the market environment since 1998 have underscored the need to re-actualize the previous SEM-7 Index, in order to better reflect current market conditions, and to introduce an Index that tracks the performance of the ten largest eligible stocks of the Official Market, measured in terms of market capitalization, liquidity and investibility criteria. The reserve-list now includes 5 stocks instead of three, meaning that investors are now able to constitute a benchmark portfolio of 15 actively traded stocks.
In September 2015, the SEM also launched its sustainability index (SEMSI), to provide a robust measure of listed companies against a set of internationally aligned and locally relevant environmental, social and governance (ESG) criteria. This Index acts as a tool for international investors having an appetite for responsible investment in frontier markets, while also promoting corporate sustainability amongst SEM listed issuers. In 2015, the SEM also become a signatory and Partner Exchange of the United Nation’s Sustainable Stock Exchanges initiative.
Over the last few years, SEM’s leadership and innovative agenda has been recognised at the highest level in the continent. SEM’s Chief Executive was elected as President of the African Securities Exchanges Association (ASEA) (the apex body regrouping 23 member Exchanges in the African region) between 2010 and 2014, and has contributed to raising the visibility of African Exchanges at the international level and improving the market ecosystem in Africa. SEM has also been very active at the global level as a member of the World Federation of Exchanges’ (WFE) (the apex body regrouping around 60 Exchanges from all around the world). SEM’s innovative drive and active involvement at the global level has been recognized by the member Exchanges of the WFE, which elected the SEM’s Chief Executive as a Director of the WFE Board for a 3-year term at the WFE’s recent general assembly in Seoul, South Korea.
SEM in fact won for the third time in five years, the "Most Innovative African Stock Exchange of the year Award" at the Institutional Investment Capital Market Awards 2015 organised by Africa investor (Ai), a leading international research and communication group. The Award was presented to the SEM at Thomson Reuters in New York on 25th September 2015. This recognition is a reflection of the SEM’s improved visibility at the international level and encourages SEM’s management to pursue its internationalisation strategy with a higher level of commitment and drive.
The last decade has been among the most enticing years for the Exchange in terms of new initiatives, breakthroughs and defining changes to strengthen the Exchange’s competitive position as a multi-asset class internationalized Stock Exchange and create the enabling environment for the listing and trading of niche international products. Looking forward, although the Exchange environment worldwide is fraught with uncertainties, the SEM remains committed to its development strategy and aims at leveraging on its attractive and competitive advantages to make further meaningful inroads and generate value-add services in its drive to scale up its activities. In the years to come, the split of listings on SEM is expected to overwhelmingly consist of international funds, international issuers, specialised debt instruments, Africa-based ventures, a broader range of ETFs and structured products. The value of products traded and settled in USD, Euro, etc. is expected to increase over time, confirming the internationalised status of the SEM over time. As SEM also aspires to emerge as a capital raising platform for Africa-focused investments routed through the Global Business Sector, the SEM platform will growingly be used to channel investment flows from SA/Europe/Asia into Africa and from USA/Europe into Asia. The number of issuers, players and investors in our market will increase over time, increasing the breadth and depth of our market in Mauritius, and also contribute in enhancing the profile of Mauritius as an IFC.
A visual trip down the SEM's memory lane : Click here to view a video