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New policy: JSE to entice foreign firms

7 February 2012

A recent policy change by the National Treasury makes it easier for South African investors to trade in foreign domiciled companies, and the JSE now considers these companies eligible for inclusion in its domestic indices.

Due to the policy change, inward or dual-listed shares on the Johannesburg Stock Exchange will be classified as domestic assets and will be able to attract increased investment.

This policy change will especially have an impact on the local mining sector, as there are several mining companies with assets and operations in South Africa and on the African continent that have a primary listings in Australia, Canada and the UK, and a secondary listing on the JSE.

Examples include Forbes Coal, with a primary listing on the Toronto Stock Exchange (TSX), and Ferrum Crescent, which is listed on the Australian Stock Exchange (ASX) and London's Alternative Investments Market (AIM). Both companies gained a secondary listing on the JSE in 2011.

"This augurs well for the JSE attracting further resource listings and we look forward to meeting the international mining companies with assets in Africa during Mining Indaba," the JSE's John Burke said in a statement this week. "On account of the policy change, both retail and institutional investors will have more flexibility and this could increase liquidity in dual listed shares."

Limits on foreign exchange

Macquarie First South Securities CEO Franco Lorenzani explained that inward listed shares traditionally attracted low volumes due to limits imposed on foreign exchange allowances.

"Now the investment decision is based on merit rather than the shackles of regulatory issues and dual listed companies will be able to raise capital more easily in South Africa," he said. "There's demand for commodities particularly out of Asia and other markets and this change was imperative to encourage investment in the region."

He added that the National Treasury, the Reserve Bank and the JSE are to be applauded for tackling the issue as South Africa would benefit with increased employment, revenue and the social benefits of mining.

Creates listing opportunities

Sasfin Capital has approximately a quarter of its clients inward listed with primary listings in jurisdictions including Toronto Stock Exchange (TSX), Australian Stock Exchange (ASX) and the London Stock Exchange (LSE).

"The recent relaxation by Treasury will go a long way to resolving these issues, and we believe that this creates a good opportunity for offshore companies with South African assets to list on the JSE and take advantage of these capital markets," said Sasfin Capital's Sarah Williams.

If a company is already listed elsewhere, a secondary listing on the JSE can be fast-tracked as the JSE recognises exchanges that are members of the World Federation of Exchanges.

Providing exposure for listed companies

The JSE also makes a considerable effort to expose its listed companies to both local and international fund managers and funds.

During Mining Indaba, this year as in other years, two showcases are held which teach investors how to invest in mining companies and then give audiences the opportunity to hear from and meet senior mining company executives.

"The message that the JSE will share with companies with African assets is that there is capital in South Africa," said Burke. "The JSE has a responsibility to provide an enabling environment in which South Africans and Africans can benefit from their resources and companies operating here.

"The reality is that if a business has projects in Africa, the JSE should be a viable preferred destination to list the business and raise capital for that project."

SAinfo reporter