South Africa’s National Treasury said it intends to allow trade in shares of offshore companies listed on the nation’s stock exchange to be classified as local, easing rules restricting foreign stock ownership.
“The National Treasury proposes that all inward-listed shares on the Johannesburg Stock Exchange be classified as domestic for the purposes of trading on the exchange and be included in its indices,” the Treasury said in the mid-term budget released in Cape Town today. “This proposal is intended to enhance the ability of the JSE to attract new listings and boost investments into Africa.”
South Africa’s exchange controls limit the foreign assets local investors may own. On Feb. 23, Finance Minister Pravin Gordhan released a discussion paper aimed at changing the so- called prudential limits.
The Treasury said it had decided to change the rules after considering public submissions on the discussion paper. Further details will be provided by JSE Ltd. (JSE), which manages South Africa’s stock exchange and lobbied for the changes.
“The positive move provides a further boost for the reputation of the country’s markets, by enabling the JSE to more aggressively pursue a wider range of investment possibilities,” JSE Chief Executive Officer Russell Loubser said in an e-mailed statement today. “It will take time to work through the practical steps to implement this and we will make an announcement in due course.”
Volume Increase Likely
The volume of trade on the JSE is likely to rise following the changes, Craig Massey, head of stock broking at Sanlam Private Investments, a unit of Sanlam Ltd. (SLM), said by phone from Cape Town.
There’s “growing concern that the JSE is missing a lot of the trades that are taking place in these stocks and they are trying to bring those trades back onshore again,” Massey said.
Funds that track the JSE’s largest companies will be obliged to invest in British American Tobacco Plc (BTI), which listed in 2008 when Remgro Ltd. (REM) and Cie. Financiere Richemont SA spun off their combined 30 percent stake, once the changes take place, Massey said. With a market value of 712 billion rand ($90 billion), it will be the largest company included in the FTSE/JSE Africa Top 40 Index.
“Prudential institutions would still be required to report their foreign exposures to the regulatory authorities, subject to regulatory criteria,” the Treasury said.
British American Tobacco is among the shares classified as an inward listing, or a foreign company trading on the JSE. This means the stock and others such as Platmin Ltd. (PPN), Net 1 UEPS Technologies Inc. (NT1) and Aquarius Platinum Ltd. (AQP) can’t be added to indexes as local investors would reach prudential limits.
The so-called London Five of Anglo American Plc (AGL), BHP Billiton Plc (BIL), SABMiller Plc (SAB), Old Mutual Plc (OML) and Investec Plc (INVP), whose shares trade in both South Africa and the U.K., will still be treated as domestic listings, and won’t be affected by the changes to the rules, Ismail Momoniat, a deputy director-general at the Treasury, said in an interview.
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