How the securities market is driving change in Mauritius
The Stock Exchange of Mauritius (SEM) went live on 13 May 2022, with a new high-end Automated Trading System (ATS). How do you see this has enhanced trading experience for Mauritius?
First of all, it is important to take cognizance of the various milestones the SEM went through over the years since 1989, its birthyear, when it was started operations under a Box Method, then an open outcry single asset class model. The leapfrog development over the years to grow the number of listed entities, enhance trading activities came through a revamping of the operating platform with the implementation of a digitalized automated system around mid-2002 running on MIT technology. After a decade, there was a need, with the latest technological leapfrog, for the SEM to upgrade the ATS into an open architecture model incorporating modern high-end surveillance modules providing real-time surveillance of market activities, enhanced broker front end modules and end-user experience.
As investors spend more time online, the new ATS provides a modern mySEM app that can be accessed via mobile or desktop with enhanced visual and trading capabilities. Clients have access through the portal to a real time view of the market with a level of sophistication shy of the broker front end module. We have noted satisfaction across our clients (fund & wealth managers, high net worth and retail clients) on the user friendliness of the module and we expect the share of mobile app trading to grow over time.
As a well-regulated jurisdiction, how do you see the Stock Exchange of Mauritius aiming to further encourage investment and placing the stock market within the grasp of the retail investor?
The role of the SEM is to act as a facilitator between issuers aiming to list or raise capital through the capital markets and investors looking to invest or trade those investments by providing a conducive environment for these operations to take place. The SEM in collaboration with its sister company, the Central Depository & Settlement System Ltd (CDS), have revamped the trading platform and ultimately the ‘ease-of’ trading & settlement. On the regulatory side, both the SEM and the Financial Services Commission have implemented stringent rules & regulations for existing and potential issuers to abide for a listing, capital raising or other corporate activity on the stock market in the spirit of accountability, corporate governance, and timely disclosure of information to the public and the investor community. On the menu card, the local stock market today offers a palette of instruments that can be classified in various asset classes (ordinary & preference shares, bonds, structured products and Exchange Traded securities) and accessible in hard currencies too.
With this diversity, an investor can build a portfolio by including instruments at the right mix to suit his investment appetite over a specific time horizon. Investments on the SEM for a retail investor could be viewed as a savings mechanism with an objective to generate value over the medium to long term. We have seen the share of retail investor activity growing over the years as the number of CDS accounts (securities account registered at an Investment Dealer) crossing over the 100,000 threshold and growing.
What are your views and advice to investors wishing to invest this year?
The Mauritian economy has been recovering after the double-digit compression due to Covid 19. GDP growth for 2022 reached 8.7% and is targeted to be around 5% for 2023. Inflation remains on the higher end of the curve during the start of 2023 and is expected to fall to around 9.5% by end of 2023, according to the IMF. Hopefully, hikes in global interest rates should come to a halt and give the market a breather. Every economic cycle brings along its share of opportunities; investors building portfolio over the long run would find appetite on the local stock market to accumulate Value Buys - corporates generating sustainable profitability, distributing generous dividends but whose share prices have not been positively impacted yet and are deemed to be fundamentally cheap. We believe that the recovery in tourism, should present opportunities for hospitality sector. As tourists are staying longer and spend more. This has been witnessed last year, with tourism earnings exceeding 2019 numbers, despite arrivals being lower compared to the same period. We also expect the banking sector to perform relatively well in the current high interest rate environment.