Interview: Bilel Sahnoun
To what extent has the recent political stability impacted activity on the BVMT?
BILEL SAHNOUN: The Tunisian stock exchange had anticipated the current political stability, which resulted in a 16% growth rate in 2014 and 11.5% growth in the first half of 2015.
In terms of initial public offerings (IPOs), 2013 and 2014 were very good years. There were 12 new companies in 2013 and six new companies in 2014. This growth can be explained by the fact that prudential banking rules have led to a tight liquidity. There were also several strong incentives for holdings, such as exemption from capital gains taxes, to encourage them to go public.
What steps can be taken to encourage IPOs and boost stock market investment?
SAHNOUN: Today, it is easier for companies to go public in Tunisia. The process is faster than before – now a company can go public in six months. Despite the incentives that exist to encourage companies to go public, capital markets only account for 7% of total investment in the Tunisian economy, which is a low figure compared to the European average of around 40%.
To reach the BVMT mid-term objective of 20%, it is necessary to demystify and democratise the stock market, which was thought to be an activity reserved for sophisticated investors. Through educational programmes dedicated to the financial culture, the message can be sent that the stock market is accessible to all.
As for companies’ investments in capital markets, it is important to note that the biggest investors are the banks, the insurance companies, the leasing companies and companies with a lot of liquidity, like social security funds. Missing sectors include telecoms, which in many countries, such as Morocco, has the biggest market capitalisation. To attract institutional investors, the stock market needs a more supportive regulatory framework.
What measures have been implemented to encourage foreign direct investment (FDI)?
SAHNOUN: Some measures have been taken to boost FDI in Tunisia. For instance, in October 2014 maximum FDI participation was raised from 49.9% to 66.6%. A consequence of this new regulation is that, in the first five months of 2015, the foreign stock market investment portfolio grew seven-fold. This is proof that, as soon as we remove the barriers, investors react immediately.
What are the main obstacles to continued development in the financial sector?
SAHNOUN: Some obstacles must be removed, as discussed above. For instance, the raising of maximum FDI participation in a company, and the opening of some protected sectors, would have a significant impact on the liquidity of the market. Another important element as discussed above, is the involvement of telecoms companies. With large-scale companies in the market, the Tunisian stock exchange could better integrate into the so-called “emerging market” category and include benchmark indices so as to help increase visibility for foreign institutional investors.
An essential way to develop the financial sector is to tackle the lack of coordination between the various players. A gathering of the different stakeholders into a unifying organisation, for instance, could be a boon to the future of Tunisian capital markets. It will strengthen financial market influence and share in financing the economy, and promote capital market players abroad. Although the BVMT is a small part of the whole ecosystem, it can be a driving force of that ecosystem, including for other market infrastructure, brokers and banks.
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