Tunisia's investors and markets waiting for structural reforms to get under way


In the 20 years since the Tunisian market opened to foreign investors in 1997, the bourse has seen limited interventions. At the end of September 2017 around 24% of market capitalisation was held by international investors; however, if those figures are adjusted with the strategic participation of the Castel Group in brewery Société de Fabrication des Boissons de Tunisie (SFBT), or French group CIC in Banque de Tunisie, BNP Paribas in UBCI and many others, we estimate the share in the hands of portfolio investors at around 5%, which is valued at approximately TD1bn (€384m).

The following questions arise: Why hasn’t foreign portfolio investment developed greatly in Tunisia? What barriers exist? And how can the BVMT attract more portfolio investors in the future?


Access to Tunisian listed equities has been limited due to the small size of companies, with an average value of $100m; the lack of liquidity in the market, with a daily trading volume of $2m; and transparency issues such as delays in releasing financials, shortage of information, poor communication, unapproachable managers and so on.

However, until recently, regulatory restrictions limited foreign investors, but the investment law passed in February 2017 has removed some of the previous restrictions, and aligned local and foreign investment rules. Observers have also called for Tunisia to do more in terms of marketing to attract different funds and investors. Some policymakers have started speaking about privatisation, such as in the cement, banking and services sectors, with proceedings planned for sometime during 2018.

Beyond this, the Tunisian market has suffered from the deteriorating economic environment since the 2011 revolution. Before 2011 foreign investors were more optimistic about Tunisia’s macro-picture as compared to other emerging markets because it was more diversified and resilient to external shocks.

Since January 2011 the economy has seen limited GDP growth, due to a variety of political and security challenges, and, above all, a sharp depreciation of the Tunisian dinar against the US dollar and the euro, by 20% and 25%, respectively, since 2016, inducing progressive foreign selling. At the same time, there was a global upswing in economic activity in the eurozone, the US and Japan, leading to a contraction in asset allocation from emerging markets to developed markets: Tunisia is suffering from a flight-to-quality phenomenon. This kind of shift is made even more difficult by the multiplier effect it has on local investors.

The most successful initial public offerings (IPOs) seen in recent years are those that have attracted the most foreign investment, such as SAH Lilas, the diaper producer listed in 2014, or Unimed, the pharmaceutical company listed in 2016. The strong appetite for consumer goods activities stimulated local demand and the IPOs were 22 and 32 times oversubscribed, respectively. Foreign portfolio investors set the trend for local investors.


How can the market exit this vicious circle? Which factors could encourage portfolio investors to return to invest in Tunisian companies? First, the economy needs to recover and reinvigorate investment. Signs of recovery began in the second quarter of 2017, and GDP growth is projected to rise to 2.3% for 2017 and 3% in 2018. The country continues to benefit from strong fundamentals such as a solid middle class, its unique geographic location and the sustained support from the international financial community. Second, foreign investors require strong signals, and as the market waits for state enterprises to be fully or partially privatised, multiple structural reforms are under way, with a promising medium-term outlook for growth potential. Ultimately, Tunisia’s macroeconomic stability is the most important pillar for foreign investment.

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The Report: Tunisia 2018

Capital Markets chapter from The Report: Tunisia 2018

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