Fadhel Abdelkefi, General Manager, Tunisie Valeurs, on changes to stock exchange regulations: Viewpoint

The Tunis Stock Exchange (Bourse des Valeurs Mobilières de Tunis, BVMT) has a technical and legal structure in line with the best international standards. It uses the trading platform used by developed markets generally, including the New York Stock Exchange and Euronext NV. BVMT is a private company exclusively owned by the broker-dealers. The depository and clearing house settles trades on a T+3 system, and there is a guarantee fund to protect operators against settlement failures. As for the main market operators, there are 23 licensed broker-dealers in total, all of whom are exchange members.

The Tunis Stock Exchange has a proven capacity to attract savings from retail investors and institutional investors alike. Since 2011, the market has grown by $4bn, following a long series of new initial public offerings (IPOs), bond issues and rights issues. The flow of new offerings has been met with strong demand from domestic and foreign investors, and the market has registered a record number of IPOs. In just three years, 15 companies were listed, which is almost the same number of IPOs reported during the period from 2000 to 2010. The liquidity crunch in the banking system has undoubtedly encouraged more companies to look to the financial market for fundraising. But the offer of new companies is still not enough, and companies from key sectors of the economy ( tourism, energy, telecoms, agriculture) are still not listing their shares on the stock exchange or raising money in the bond market.

The major issue for the BVMT is the lack of diversification – indeed, it is predominantly a market for retail investors. The only active institutional investors are foreign. We still are not seeing domestic institutions like the insurance companies actively buying and selling stocks in the market. If we want to see the market improve in the future, there is a need to enlarge the scope of new offerings through privatisation deals and the listing of large state-owned companies. Also, the large private groups must be encouraged to list their companies so that the market becomes more attractive to the local and foreign investors looking for new opportunities. The stock exchange should also play its natural role of strengthening the equity base of companies looking to issue new shares and benefit from the tax advantages related to new listings and rights issues.

The key element for the market today is demand. And there is no other way to stimulate demand other than to encourage domestic institutional investors like insurance companies, pension funds and the Caisse des Dépots et des Consignations to allocate money to the equity markets.

Current foreign ownership restrictions should be eased to allow more foreign inflows. Tunisian law-makers should remove the bias they have on foreign investors as daily traders.

The recent change in foreign ownership laws for the largest brewery, Société de Fabrication des Boissons de Tunisie (SFBT), has attracted some of the best foreign institutional investors specialising in emerging markets.

On the local side, the market should aim to attract more stable savings to equities through the establishment of dedicated vehicles acting as institutional investors, like collective investment schemes or special vehicles tied to life insurance or mortgage products. All these initiatives must be backed by a regulation that encourages investments in equity and bond markets. Tunisia has managed to build solid financial infrastructure and lay the foundations of a mature and efficient market. It is time to enable the market to make a proper take-off and assume its natural role as one of the pivotal financial tools of the economy.