Mauritius will launch a new stock market by June 2006 to seek to attract foreign investors to medium-sized companies in sectors from tourism to financial services, the Indian Ocean island's exchange said on Thursday.
The bourse will replace an unregulated over-the-counter market of 80 firms and will run in parallel with the main SEMDEX market (www.semdex.com), which is trading near record highs due largely to declines in local interest rates.
"We need to bring in new products, we need to bring in new companies," Sunil Benimadhu, chief executive of the Stock Exchange of Mauritius Ltd, told Reuters in an interview.
"We're targeting June 2006 ... We should have finished with the process and have this new market up and running," he said.
The exchange is seeking new ways to lure foreign investors to one of the better-performing economies in Africa, although a complex system of long-standing cross-holdings among blue chips on the main market has undermined liquidity.
Benimadhu said he expected at least half of around 80 companies listed on the existing over-the-counter system, with a total market capitalisation of more than 35 billion Mauritius rupees ($1.21 billion), to migrate to the new market.
Foreign investors are barred from over-the-counter trades, but Benimadhu they will be welcome in the replacement exchange, which will have a minimum free-float requirement of 10 percent of a company's shares and simpler listing rules.
Benimadhu hopes local businesses will make initial public offerings on the new market, along with subsidiaries of foreign firms such as major Indian corporations which have shown increasing interest in the island in recent years.
Facing major losses in its sugar and textile sectors from the end of overseas subsidies and quotas this year, Mauritius is seeking to diversify its economy to combat growing unemployment among the 1.2 million people on the island off south-east Africa.
The government of Prime Minister Paul Berenger, expected to face a stiff challenge from the opposition Social Alliance in elections on July 3, wants to attract investors by turning the island into a hub for information technology and services.
Indian companies Indian Oil Corp, Infosys Technologies Ltd and Mahanagar Telephone Nigam Ltd have invested in recent years in Mauritius, which is peopled largely by descendants of Indian labourers, who arrived in the mid 19th century to cut sugar cane after slavery was abolished.
BANKS AND INSURANCE:
Banks and insurance companies account for about a third of the main SEMDEX index, led by the most heavily weighted stock, Mauritius Commercial Bank, while firms such as Sun Resorts and New Mauritius Hotels dominate the large leisure sector.
The 40-listing SEMDEX - which has market capitalisation of about 68 billion rupees and one of Africa's few fully automated settlement systems - has climbed to around record highs above 710 points this year from 390 in late 2000.
Analysts say falling interest rates in recent years have buoyed the market by encouraging Mauritian pension funds and other investors to switch from government debt into equities.
Benimadhu said good results from blue-chip companies had also driven much of the growth on the SEMDEX, preserving the market's average price/earnings ratio at around 9.9, which he said reflected earnings rising in line with stock-price rises.
Markets expect the rupee to depreciate from about 29.0 to the dollar due to pressure on inflows - which could weigh on foreign investor demand - although the central bank says it will take action to keep the unit at current levels.
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