afrol News
19 April 2010

An Angolan stock exchange, predicted for launch later in the year, may have "the makings of an African giant," according to a new assessment. In the region, only the South African stock exchange will be bigger, according to the analysis.



A study by Anthony Lopes Pinto, the chief of the Luanda offices of the Botswana-registered investment company Imara, suggests that the planned bourse - the Bolsa de Valores e Derivativos de Angola or BVDA - "has the potential to become the third largest in sub-Saharan Africa after the South African and Nigerian stock exchanges."

Mr Lopes Pinto holds that "efforts to obtain a sovereign credit rating in order to access international debt markets are well under way, and should reinforce long-term stability and result in a deepening of the market. Diversification of the economy away from oil continues apace and, commendably, the government has recently appointed Ernst & Young to eliminate fiscal inefficiencies."

"With the financial crisis now firmly behind us, we anticipate the opening of the Angolan bourse this year," the financial analyst adds. "This will augment the national savings rate, creating alternatives for Angolan companies in need of growth capital. Such a move will also attract foreign portfolio inflows, which globally have recovered strongly."

Mr Lopes Pinto's assessment of the potential strength of an Angolan bourse considers two scenarios - a top-down macro view and a bottom-up appraisal with tight focus on 14 likely initial public offering (IPO) candidates.

The broad view considers Angola's estimated gross domestic product of US$ 84.9 billion and the capitalisation of African stock exchanges relative to GDP, an average of 42 percent. This calculation suggests that the BVDA could have a market capitalisation of US$ 36 billion, nearly three times the size of Kenya's well-established stock market.

A US$ 36 billion Angolan stock market would still be dwarfed by South Africa's JSE, with its 331 listing companies and total market cap of US$ 801 billion. But it would not be too far behind the Nigerian market, with 195 listings and a capitalisation of US$ 39.67 billion.

In comparison, Angola's southern African neighbours Botswana, Zimbabwe and Zambia would be stock exchange minnows. Botswana's exchange has a market capitalisation of only US$ 4.18 billion, with Zimbabwe down at just US$ 3.6 billion, though Zambia is a little higher up the market cap league table at US$ 15.23 billion.

After considering macro potential, Imara's Luanda office chief sketches a much more conservative picture based on research of 14 companies that might become initial BVDA members. This snapshot covers 10 banks - with a projected market cap of US$ 3.99 billion -two brewers (US$ 2.90 billion) and two telecoms (US$ 4.39 billion).

Even this minimalist assessment suggests a total market capitalisation of about US$ 11.28 billion would be achievable, the analyst holds. Mr Lopes Pinto adds: "We believe this to be the tip of the iceberg. We understand up to 50 companies have been identified as IPO candidates."

"As this is not an exhaustive list, our conclusions can be viewed as most conservative. Further, our valuations are diluted in large measure by the fact that sub-Saharan equity markets, with the exception of South Africa, still lag the recovery witnessed in emerging markets. Nonetheless, an US$ 11 billion market will still feature prominently in Africa's top ten," Mr Lopes Pinto concludes.