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GLOBAL: Several of the
largest stock exchanges in sub-Saharan Africa have initiated discussions to
cross-list new and existing exchange-traded funds (ETFs) in a move that is
anticipated to deepen liquidity across the region and boost the popularity
of ETFs as an investment instrument.
The cross-listing decision by the bourses of South Africa, Nigeria and
Kenya will allow investors access to liquid company shares tracked by
indexes such as the FTSE/JSE Top 40, the FTSE/NSE Kenya 15 Index and the
MSCI/Nigeria.
“ETFs are one of the fastest-growing asset class categories in the world.
By collaborating with Africa’s largest stock exchanges, we hope to
spearhead this trend in Africa,” explained Donna Oosthuyse, the director
for capital markets at the Johannesburg Stock Exchange. In addition to
driving liquidity in home markets, cross-listing ETFs across these markets
will also, according to Oosthuyse: “Provide extra visibility on the shares
on that exchange to new investors who in all likelihood don’t yet trade on
that market.”
As a collection of equities, commodities or bonds packaged in a fund, ETFs
are an appealing instrument as they provide much-needed risk
diversification across a wider range of exposure in a more cost-efficient
manner. While popular in the conventional space, ETFs, however, do not
feature as prominently in the Islamic landscape, although they are slowly
gaining traction. Industry data shows that there are fewer than 30 Islamic
ETFs worldwide with sub-Saharan Africa accounting for two: Absa Capital’s
Shari’ah Top 40 Index ETF and Lotus Capital’s Lotus Halal ETF.
Comparing the three African exchanges involved, South Africa and Nigeria
lead in terms of ETFs with both the countries housing one Shariah compliant
ETF each while Kenya on the other hand, has made it a priority to launch
ETFs this year as it seeks to bolster liquidity by broadening its
investment product universe. Kenya’s Capital Markets Authority earlier in
April agreed on an ETF roadmap with these funds to be listed on the Nairobi
Securities Exchange.
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Bangladesh: No more Islamic banks
Bangladesh Bank (BB), the regulatory authority of banks in Bangladesh have
decided not to issue any more Islamic banking licenses, meaning that there
will be no more conversion of conventional banks to Islamic banks and no
more Islamic banking windows or branches of conventional banks. According
to BB deputy governor S K Sur Chowdhury, the operations of conventional and
Islamic banks are to be kept separate from each other because of concerns
about possible violations of Shariah principles. He added that for now it
has been stopped, but in future, if the government takes any new decision,
it may be allowed again.
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