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 October 6th, 2008, SEM became a public company. SEM in fact started its operations as a small pre-emerging exchange with a manual trading platform, but has during the last two decades witnessed a significant overhaul of its operational, technological and regulatory frameworks which has placed it among the leading exchanges in Africa in terms of operational excellence. SEM is today a full-fledged member of the World Federation of Exchanges (WFE).
SEM operates two markets: the Official Market, the Development & Enterprise Market (DEM). SEM can list, trade and settle equity and debt products in USD, Euro, GBP, ZAR and MUR. Local investors account for about 60 % of the daily trading activities, and foreign investors account for the 40 % remaining. 75 % of that local volume is generated by institutions like mutual funds, pension funds and insurance companies.
SEM started its operations with the Official Market in 1989 with five listed companies 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 80% (the highest in Sub Saharan Africa excluding South Africa), in an economy that has witnessed a 5% average growth rate during the last 25 years. SEM has also, over the years, 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 a large number of retail investors to participate in the growth story of a number of listed companies. Currently, there are 42 companies listed on the Official Market representing a market capitalisation of nearly US$ 7.2 billion as at 31 December 2014. The DEM has been launched on 4 August 2006 and there are presently 47 companies listed on this market with a market capitalisation of nearly US$ 1.5 billion as at 31 December 2014.
12 investment dealers operate on the Mauritius Bourse. Each investment dealer holds a license granted by the Financial Services Commission. Investment dealers are required to have at least one duly licensed representative who shall be entitled to carry out the functions of the Investment dealer. SEM also has in place rules for remote membership, with a view to encouraging membership from foreign brokers and foreign participants to our market. This reinforces the attractiveness of SEM as a listing and capital-raising platform for African and emerging markets issuers.
The stock market was opened to foreign investors following the lifting of exchange control in 1994. Foreign investors do not need approval to trade shares, unless investment is for the purpose of legal or management control of a Mauritian company or 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. Foreign investors have, over the years, emerged as key players on the SEM and currently account for about 40 % of the daily trading volumes on the Exchange. Given the growing interest that frontier markets like Mauritius are attracting from international investors in search of investment opportunities in high growth economies, we expect further increases of foreign investment inflows on the SEM in the coming years.
Over the years, our efforts have been be geared towards ensuring that the SEM remains at the forefront of institutional reform and development while offering quality services to its stakeholders and contributing to the deepening and broadening of the financial sector in Mauritius. Much of our focus has been geared towards updating the current operational and regulatory framework to reflect the ever-changing standards of the Stock Exchange environment worldwide and the requirements of the Securities Act 2005.
The successful implementation of the Central Depository System (CDS) in January 1997 has brought about prompt, efficient clearing and settlement of trades and at the same time reduced some of the inherent risks in the process. With the support of the Bank of Mauritius which acts as clearing bank, CDS ensures delivery versus payment (DVP) on a T+3 rolling basis. The CDS also provides for a Guarantee Fund Mechanism to guarantee settlement failures of participants.
SEM's Automated Trading System (SEMATS) was launched on 29th June 2001. It constitutes a state-of-the-art electronic trading system built on third generation technology. SEMATS puts an end to traditional trading patterns which have typified the Stock Exchange of Mauritius since its inception. Trading in securities is conducted through dedicated trading workstations located at intermediate dealers and linked by communication lines to the SEM trading engine. Today, SEM is readily accessible to investors around the world through our open architecture technology. An investor can follow our market on a real time basis and seize investment opportunities on a real time basis through our web-based technology. Our market is one of the most open markets in Africa, and readily welcomes investors from different regions. Similarly, SEM is today connected live to the top bracket of global data vendors, enabling therefore both retail and institutional investors worldwide to follow our market on a real-time basis.
Similarly, the trading of treasury bills on the market has been introduced by the SEM in December 2003, a first step of a process aimed at the setting up of an active secondary market for government instruments. Likewise, SEM has been working closely with the Central Bank and Commercial Banks to set up a platform to trade medium and longterm government securities on the Exchange. The operational framework of this market has been already finalized. Commercial Banks which have been licensed as Primary Dealers by the Central Bank will act as Market Makers on the SEM platform to ensure liquidity. This initiative will contribute to the creation of a yield curve and act as a lynchpin to the creation of an active secondary Bond market for private issuers.
The attainment of Membership status of the World Federation of Exchanges (WFE) in November 2005 also constituted an important milestone that has enabled the SEM to join the league of stock exchanges that are compliant with the stringent standards and market principles established by the WFE. The latter is a central reference point and standards setter for exchanges and the securities industry in the world. Membership identifies the SEM as having assumed the commitment to prescribed business standards, recognized as such by users of exchanges, as well as by regulators and supervisory bodies.This WFE membership status underpins the growing role that foreign investors are today playing in our market. In a typical year, foreign investments represent 25–35% of trading activities on our market.
SEM set up in 2006 the Development & Enterprise Market (DEM), which is a market designed for Small and Medium-sized Enterprises (SME’s) and newly set-up companies which possess a sound business plan and demonstrate a good growth potential. It is meant for companies wishing to avail themselves of the advantages and facilities provided by an organised and regulated market to raise capital to fund their future growth, improve liquidity in their shares, obtain an objective market valuation of their shares and enhance their overall corporate image.
Since 2010, the SEM is going through a strategic reorientation of its activities and gradually moving away from an equity-based domestic Exchange to a multi-product internationally oriented Exchange, in the pursuit of its internationalisation strategy. This internationalisation process is aiming at moving up the value-chain of products listed/traded on the SEM platform and setting the stage for the Stock Exchange of Mauritius to gradually emerge as an attractive listing, trading and capital-raising platform offering a diversity of products and services for Global funds, Global business companies, Mining and Mineral companies, specialist-debt products, Africa-based ventures, Government securities, and become a centre of attraction for regional and global capital.
In early 2010, SEM brought major changes to its Listing Rules to align them with the Collective Investment Schemes Regulations 2008 with a view to positioning the SEM as an attractive venue for the Listing of Global and Specialised Funds. Changes to our Listing Rules to attract the listing of Global and Specialised Funds on the Exchange fits very well with the strategic shift currently underway at the SEM. The Exchange has made its Listing Rules more flexible to reflect the specific attributes and characteristics of the Specialised Funds it would like to list on the SEM. This initiative goes a long way in making the SEM a platform of choice for the listing of a wide variety of funds such as Specialised Collective Investment Schemes, Professional Collective Schemes Export Funds, Global Schemes, and the SEM is keen in diversifying its products offerings and gradually emerge as an international exchange. The SEM has also a commitment to aggressive timings on processing of listing applications and has adopted a listing fee structure which is very competitive.
In March 2010, the SEM was designated by the Cayman Islands Monetary Authority (CIMA), an Approved Stock Exchange by virtue of its membership of the World Federation of Exchanges for the purposes of CIMA’s Mutual Funds Law, Banks and Trust Companies Law, Insurance Law, Companies Management Law and Securities Investment Business Law. 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” under section 1005 (1) (b) Income Tax Act 2007. As a result of this development, securities admitted to trading and listed on the Official Market of the SEM will meet the HMRC interpretation of “listed” as set out in section 1005 (3) (a) and (3) (b) Income Tax Act 2007. Under this designation as a 'recognised stock exchange', SEM will also be 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.
In May 2011, SEM introduced a new Chapter, namely Chapter 18 in the SEM’s Listing Rules, to cater for the listing of Global Business companies and other specialist companies as well as specialist debt instruments, targeted at qualified investors. This path represents a major shift for SEM from a domestic-equity-focused Exchange to a multi-product-internationally-focused Exchange. SEM listed it's first GBL I company in March 2012.
SEM has more recently in April 2012 introduced listing rules for Depositary Receipts and Mineral Companies on the Official Market of the SEM as well as Requirements for the listing of junior Mineral Companies and Exploration Companies on the Development and Enterprise Market (DEM).
In September 2012, SEM was awarded for the second consecutive year the “Most Innovative African Stock Exchange of the Year Award” at the Africa investor (Ai) prestigious annual Index Series Awards held at the New York Stock Exchange (NYSE). The Award in the “Most Innovative African Stock Exchange” category was given on the basis of a number of criteria, including, amongst others, initiatives implemented by the Exchange to embrace new areas of development, programmes in place to enhance the services it provides to its key stakeholders and compliance of the Exchange’s regulatory and operational set-up with international standards. SEM topped the “Most Innovative Stock Exchange” category out of a group of eight African Stock Exchanges nominated, the other nominees being Johannesburg Stock Exchange, Egyptian Exchange, Casablanca Stock Exchange, Nigeria Stock Exchange, Nairobi Stock Exchange, Ghana Stock Exchange, Botswana Stock Exchange and Uganda Stock Exchange.
Conscious of the investors’ needs for new and innovative products that can ensure dynamic portfolio management, SEM introduced on 26 July 2013, the listing and trading of Exchange Traded Funds (ETFs) on its platform. The objective is to diversify the range of products that are traded on the Exchange and allow local investors gain exposure to foreign underlying. This listing and trading of the first Exchange Traded Fund in Mauritius, takes SEM's internationalisation strategy one notch up and introduces a new asset class to the existing gamut of products traded on the Exchange. The ETF NewGold and ETF Platinum are eRAFI-40 ETF are listed on SEM. The eRAFI-40 gives Mauritian investors a cost-efficient and simple exposure to 40 of the best performing South African companies listed on the Johannesburg Stock Exchange.
With effect as from December 2013, SEM significantly reduced transaction fees on turnaround trades by 88% of the total brokerage fee from 1.25% to 0.15%. A turnaround trade on the SEM involves: (i) the selling of a security that has been purchased earlier during the same settlement cycle (i.e within 2 days of the initial purchase) to take advantage of an upward movement in the price of the underlying security, or (ii) the purchase of a security that has been sold earlier during the same settlement cycle (i.e within 2 days of the initial sale) to take advantage of a downward movement in the price of the underlying security, assuming that the investor holds the security in his/her securities account prior to the initial sale. This significant reduction in trading fees on turnaround trades for investors at large, is expected to increase the volume of transactions on the SEM over time, enhance active trading on the Exchange and boost liquidity. It will also reinforce the position of the SEM as an attractive listing, trading and capital-raising platform for local, regional and global issuers and contribute to the positioning of Mauritius as an attractive international financial services centre of substance.
Effective as from January 2014, SEM also significantly reduced transaction fees on corporate bond trading by 83% from 0.60% to 0.10%. This sets the stage for active trading on corporate bonds. This initiative also enhances the attractiveness of investments in corporate bonds, facilitates exit from these instruments. It also potentially enhances the scope of further listings of corporate bonds on the SEM, setting the stage for the development of an attractive secondary market for corporate bonds.
From a foreign investment perspective, the Mauritius Bourse attracted strong foreign investor interest particularly over the last decade, generating positive investment inflows on many listed companies. Foreign investors currently account for about 40% to 45% of the daily trading volumes on the Exchange. For 2014, we are already stepping up our efforts via international conferences and roadshows, to place the SEM on the radar screen of institutional investors who are keen on frontier emerging markets that are well regulated and adhere to international best practice.
SEM is today connected live to a top bracket of global vendors including the likes of Thompson Reuters, Interactive Data and more recently Financial Times, Factset, Bloomberg and Inet Bridge since 2010, enabling therefore both retail and institutional investors worldwide to follow our market on a real-time basis. 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 in particular which are all subscribers to global data vending terminals, thus attracting more foreign investor interest on our market. SEM is in fact one of the few Exchanges in Africa to be connected to Bloomberg and Thompson Reuters on a real-time basis. Similarly. the growing interest from international investors in recent years, has prompted well-known Index and Data Providers like Standard & Poors, 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.
Looking forward, SEM is committed to reinforcing its foundations and maintaining its development momentum in line with its multi-pronged internationalisation strategy of steadily moving from a domestic-equity-focused Exchange to a multi-product-internationally-focused Exchange. 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 thereby also bringing a meaningful contribution to the integration of the Mauritius financial services sector within the international financial system. SEM also aims at consolidating its position with a view to further contributing more broadly to the development of the Mauritian economy and of capital market activities on the national and regional fronts.
Reminiscences of 25 years of SEM's history - Click here for a synthesis
A visual trip down the memory lane for SEM over the last 25 years : Click here to view a video