Interview: Walid Saibi
How does the Tunis Stock Exchange (Bourse des Valeurs Mobilières de Tunis, BVMT) compare to other markets in the Maghreb region?
WALID SAIBI: At first glance, the BVMT could seem unattractive when compared to its regional peers given its small size, low trading volumes, poor communication by the companies listed on it and a difficult macroeconomic situation. These challenges obviously create unwelcome uncertainties for foreign investors.
Nevertheless, the Tunisian financial sector is one of the most developed in the region with an infrastructure that is in line with the best international standards of technology, regulation and best practices. Moreover, the fiscal regime of the Tunisian financial sector remains competitive. For example, dividends are subject to a withholding tax of 5%, and capital gains are not taxed when investors hold their stocks for more than two years, or even less in certain instances.
The outlook of the BVMT remains positive to the extent that a significant amount of major companies are yet to go public. The privatisation and listing of key companies would boost the market’s size and development, as was the case in Egypt with the listing of Al Ahram Beverages in 1997 and in Morocco with the listing of Maroc Telecom in 2004.
What type of foreign investors are currently interested in the Tunisian market?
SAIBI: Africa-focused funds are the main foreign investors in the BVMT, in addition to some foreign pension funds. These are long-term investors as university endowments constitute most of their underlying assets. Unfortunately, these funds generally face difficulties when investing in Tunisia, given that the small number of listed companies makes it difficult for fund managers to fulfil minimum ticket size requirements. Other types of investors such as frontier market investors are still missing in Tunisia, although they are the ideal profile for small markets. These kinds of investors are more lenient when it comes to assessing political stability, liquidity and foreign exchange parameters. Tunisian market operators should do more in terms of marketing to attract these frontier funds.
How will the demutualisation of the BVMT affect its attractiveness to investors?
SAIBI: The demutualisation of the BVMT is yet to be realised, but it would contribute to the ongoing effort to modernise Tunisia’s capital markets. Demutualisation has two main objectives: to open the stock exchange’s capital to new shareholders, and to welcome new market players. Demutualisation may also pave the way to new partnerships with other stock exchanges. By creating a better environment for investors with more operational flexibility and more integration in the financial ecosystem, demutualisation could indirectly attract more foreign investors, as was the case after the demutualisation of the Casablanca stock exchange in Morocco.
In what ways can Tunisia make its stock exchange more attractive to foreign investors?
SAIBI: Financial regulation in Tunisia is favourable for foreign investment, but the financial sector itself must overcome two major obstacles – the small size of the market and the lack of liquidity. To overcome these obstacles the sector needs to boost both supply and demand. Increasing demand will require encouraging large, local asset managers to trade more in the stock exchange. Boosting supply will require raising the number of listed companies, such as large state-owned enterprises that have yet to be partially or wholly privatised as well as large private groups. Tunisia already benefits from much international political support, but the government could attract more sustainable economic investment if it were to list state-owned enterprises. With robust supply and demand, frontier fund managers will begin to invest in Tunisia.
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