FTSE Group and the African Securities Exchanges Association (ASEA) have joined to form a new partnership for investing.
A new pan-African stock market index being launched by the FTSE Group and the African Securities Exchanges Association (ASEA) will help to improve the visibility of African equities. The FTSE-ASEA Pan Africa Index due to be launched early in the second quarter of 2012, will initially carry stocks from 16 of the 22 ASEA member bourses. These range from the Moroccan, Nigerian and Zimbabwean exchanges down to Malawi, Botswana and Tanzania.
The frontier and emerging categories of most investment indexes fail to include a representative spread of African stocks: South Africa’s, Mauritius’s and Egypt’s stocks are the most likely to be included. But a backdated test of the new index that examines its performance between 2008 and 2011 shows that it outperformed both the FTSE EMEA Index and its All-World Index.
Companies must have a free float greater than 15 percent to be included on the index, which cannot have more than 30 companies from any one country, nor any one market with weighting greater than 20 percent. There will be two versions: one with and one without South Africa.
Although the final index and its constituent stocks and weightings are subject to change, an initial snapshot presented to the ASEA conference in Marrakech in December showed a total investable market capitalisation approaching $350bn.
The underlying data, including which stocks are indexed and their weightings, will only be available upon subscription.
“This index is without prejudice,” says Jonathan Cooper, managing director for Middle East and Africa at the FTSE Group. “It gives Africa as a whole the opportunity to receive the same focus.”
Initially, FTSE Group expects the index to be used for research and benchmarking purposes but hopes it could soon attract tracker funds. Peter Mwangi, chief executive of the Nairobi Stock Exchange (NSE), argues that this index “should have been done a while back”.
African exchanges are becoming more savvy about the need to package their information and make money selling it to information vendors.
In November, in collaboration with FTSE Group, the NSE launched two new indexes of the 25 most liquid stocks and the 15 largest stocks. Mwangi says they have been well received by international investors.
Investment(s) and investing opportunities loom large in Africa. Contrary to popular beliefs, the risk is how and rewards are high investing in the region. With some knowledge and patience, one is sure to end up with a wise investment.