African countries looking to cross-list exchange-traded funds
Market participants in Nigeria, Kenya and South Africa are in talks to launch the cross-listing of exchange-traded funds (ETFs) to provide domestic investors access to opportunities from another market.
“By cross-listing ETFs on African exchanges, investors will be given access to liquid company shares tracked by indices such as the FTSE/JSE Top 40; the FTSE/NSE Kenya 15 Index; and the MSCI/Nigeria.
“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 on the continent,” JSE capital markets director Donna Oosthuyse said.
The cross-listings of ETFs would also improve the liquidity of Africa’s largest stock exchanges.
Oosthuyse explained that the advantages for companies included in the ETF indices were that such funds needed to be “fully covered”.
“This 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.
"If an ETF from Kenya or Nigeria is listed on the JSE, then the asset manager in Kenya or Nigeria has to buy and sell the constituent shares on the home market, as units in the ETF are bought and sold. This drives liquidity in the home market,” she noted.
In addition, it provided extra visibility on the shares on that exchange to new investors who, in all likelihood, did not yet trade on that market.
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