The Stock Exchange of Mauritius (SEM) has opened a window for Kenyan investment banks and stockbrokers to trade on its market platform, potentially opening up new offshore investment options in the Indian Ocean Island State.
SEM’s chief executive Sunil Benimadhu said in the exchange’s 2022 annual report that a new automated trading system (ATS) installed last year will allow the integration of foreign intermediaries.
Allowing foreign members onto its ATS will allow the SEM to tap into a wider pool of investors, with the move coming at a time when African exchanges have sought to boost cross-border trading to improve liquidity and trade activity in their markets.
Last November, seven African exchanges, including the Nairobi Securities Exchange (NSE) and SEM, launched the African Exchanges Linkage Project (AELP) which is meant to facilitate cross-border trading of securities in Africa.
The AELP is a flagship project of the African Securities Exchanges Association (ASEA) and the African Development Bank (AfDB).
“The new ATS of the SEM has facilitated the integration of remote members to our platform. Consequently, despite the difficult economic environment, the SEM will work towards attracting remote members, initially from South Africa and Kenya, during the financial year 2022/ 2023,” said Mr Benimadhu.
“The objective of this initiative is to increase the investor base of our market and attract more global order flows to our platform”.
The Mauritian exchange has been looking to compete with European platforms as a host for African capital-raising ventures, including the issuance of sovereign bonds.
The exchange currently offers a multi-currency platform, through which it hopes to attract the participation of foreign stockbrokers.
The market also offers a raft of fiscal incentives to investors that include no withholding tax on dividends, no capital gains taxes, free repatriation of profits, capital and interest, as well as double taxation avoidance treaties.
The incentives are meant to help widen the pool of investors in its capital markets beyond the relatively thin population of the island nation.
The Mauritian exchange has about 100,000 account holders, who hold about 17.2 billion shares with a market capitalisation of Ksh1.09 trillion ($7.4 billion).
In the past decade, Mauritian financial sector firms have established a presence in Kenya, following a growth in bilateral investment flows between the two countries after the inking of a double-taxation agreement in 2012.
Some key deals include the acquisition of Fidelity Bank and assets of the collapsed Chase Bank by SEM-listed financial services group SBM Holdings and in the capital markets, fund manager Axys’ acquisition of stockbroker ApexAfrica Capital.
A number of Kenyan firms have also moved the other way, establishing offices there to take advantage of more favourable tax laws.