African Bond Markets Country Details

Transcription

1 African Bond Markets Country Details November 2014

2 African Bond Markets Country Details Comparison of the most developed African countries Key facts about African bond markets by country South Africa Morocco Mauritius Botswana Namibia Nigeria Egypt Kenya Ghana Uganda Tunisia Zambia 2

3 Comparison of the most developed African countries (1) Selected information on the top 12 countries* (1/2) Country S. Africa Morocco Mauritius Botswana Namibia Nigeria Population (in millions) GDP per capita (in USD) p.a. 6,350 3,260 10,580 7,060 5,130 3,000 Total debt per capita (in USD) 2,875 2,020 5,700 1,120 1, Debt to GDP ratio CPI Number of local currency bonds Volume of local currency bonds (in billion USD as of 05 Nov 14) Yields (05 Nov 14) 6M 6.7% 2.8% 1.6% 3.7% 6.5% 10.1% 1Y 7.0 % 2.9% 2.3% 4.1% 7.1% 11.3% 3Y 7.0 % 3.2% 3.4% 4.5% 7.6% 11.1% 5Y 7.1% 3.4% 5.5% 6.1% 7.8% 12.6% 10Y 8.2% 4.4% 6.3% NA 8.9% 13.5% Market access restrictions for non-residents none none none none none none * According to the Concerto Country Evaluation Analysis Source: AfDB data, Concerto November

4 Comparison of the most developed African countries (2) Selected information on the top 12 countries (2/2) Country Egypt Kenya Ghana Uganda Tunisia Zambia Population (in millions) GDP per capita (in USD) p.a. 3,000 1,000 1, ,100 1,760 Total debt per capita (in USD) 2, , Debt to GDP ratio 89, CPI , Number of local currency bonds Volume of local currency bonds (in billion USD as of 05 Nov 14) Yields (05 Nov 14) 6M 11.6% 10.8% 21.6% 10.0% 5.0% 17.4% 1Y 11.9% 10.7% 24.0% 12.4% 5.1% 18.9% 3Y 13.2% 10.9% 25.1% 13.4% 5.6% 18.7% 5Y 13.2% 11.1% NA 13.4% 6.0% 18.7% 10Y 15.2% 12.2% NA 13.8% 6.3% 19.0% Market access restrictions for non-residents none none Foreigners may acquire 3Y or longer term bonds only none Foreign holdings max of 20% of all debt none 4

5 South Africa South Africa s financial sector accounts for about 20 % of its GDP Government securities can be traded on the exchange or over-the-counter Non-residents may purchase local securities without restriction and may freely transfer capital into and out of South Africa; transactions must be reported to authorities The Bond Exchange of South Africa (BESA), licensed under the Financial Markets Control Act, is a wholly-owned subsidiary of the Johannesburg Stock Exchange since 2009 BESA/JSE provide a platform for the listing of rand-denominated debt securities issued by central and local government, public enterprises and other corporate entities Bond issuance by the government of South Africa is an integral part of the country s financing for longer-term projects. The following are the main issuers of debt in South Africa: Central government, Municipal government, State owned enterprises, water authorities, corporates & Banks The South African Rand (ZAR) is a freely floating unitary exchange Restrictions on non-resident capital flows have been fully liberalized and restrictions on residents are gradually being relaxed Only fully licensed authorized dealers are permitted to deal in foreign exchange in South Africa 5

6 Morocco Morocco s capital markets are relatively well developed Government bonds trade through Casablanca Stock Exchange (CSE) and settle on T+3 in Maroclear Treasury bills, which are non-listed securities, trade OTC and settle on T+0 Morocco actively uses the bond markets in its financing strategy, issuing bonds regularly and in all maturity bands Morocco s fairly well developed financial system also has an established investor base mainly comprised of the pension sector the mutual fund industry and insurance The Moroccan Dirham (MAD) is pegged to the value of a basket 80% EUR and 20% USD, reflecting the country s key trading partners. Bank Al-Maghrib intervenes in the market to keep rates within a trading band of +/0.3 % around the target rate that is set daily 6

7 Mauritius Mauritius is one of Sub-Saharan Africa s strongest economies Bond markets in Mauritius offer investment opportunities for long-term investors, such as pension funds and insurance companies The BOM settles and safe keeps treasury notes and treasury bills, these securities can be traded on the exchange or in the OTC segment Public debt is nearly all held by the National Pensions Fund and the commercial banks. In addition there is an insurance sector with significant assets Mauritius has a transparent and well-defined foreign investment code Residents and non-residents may hold foreign exchange accounts There are no controls on payments or transfers Mauritius has a diversified investor base. Investments into fixed income market witnesses a wide range of investors including commercial banks, pension and insurance funds, hedge funds Mauritius has a managed floating foreign exchange regime and the Mauritian Rupee is fully convertible. Both the current and capital accounts are fully convertible and there are no reporting requirements for investors, both resident and non-resident, to move funds in or out of Mauritius 7

8 Botswana Botswana is transforming to a fast-growing, dynamic economy Foreigners in Botswana can buy government bonds, corporate bonds and stocks on the stock exchange Non-residents are allowed to trade Pula-denominated bonds whose time to maturity at issue was over 1 year Botswana has one of the highest credit ratings in Africa Botswana government bonds are issued with short, medium and long-term maturities Holdings of government bonds are dominated by institutional investors, with relatively small holdings by the banks (primary dealers) for their own account The bond market is characterized by buy and hold strategies on the part of local institutions, such as pension funds and life insurance companies The Botswana Pula (BWP) is a fully convertible currency The spot market is liquid and the main cross is BWP/USD, BWP is also quoted against GBP, EUR and ZAR 8

9 Namibia Namibia is a member of the Common Monetary Area with South Africa The Bank of Namibia (BoN) has some level of policy discretion which allows it to maintain a different Repo rate from that set by the South African Reserve Bank Namibia is an active issuer of government bonds The debt market is over-the-counter (OTC) and participants trade as counterparties Pension funds are the largest investors in Namibia, and are required to keep 35 % of their assets invested in Namibian instruments. While this provides a market for bond issuers, the institutions tend to adopt a buy and hold strategy. The other sizeable investors base are the Namibian insurers There is free and unrestricted flow of both the Rand and the Namibian Dollar between South Africa and Namibia, however this is subject to clearance from the Bank of Namibia (BoN) Government issued securities are held in physical form, while T-bills are in immobilized form at the BON Both the Namibia Dollar and the South African Rand are legal tender in the country. The Namibia Dollar is convertible regionally into the Rand, but it is not convertible internationally 9

10 Nigeria Nigeria s capital markets are amongst the most developed in Africa Government securities in Nigeria include Federal government bonds (FGN) and treasury bills (NTB) Government securities are traded OTC. Settlement usually is on T+2 Settlement takes place at the Central Securities Clearing System (CSCS) Nigeria has been an active issuer of government bonds Foreigners are allowed to invest in the bond markets, but are restricted to Government securities with a tenor of 1 year and above. However, holders of longer bonds can invest in instruments of less than a year to maturity such as commercial paper, bankers acceptances and negotiable certificates of deposit The Nigerian Naira (NGN) is governed by a managed float policy with no stipulated boundaries 10

11 Egypt Egypt has a sizeable investor base by African standards Full private-sector ownership, including foreign ownership, is allowed in banking and insurance Five public banks dominate the sector Many large international financial institutions in commercial and investment banking, mutual funds, insurance, and securities trading now operate in Egypt While Egyptian government securities include treasury bonds and treasury bills, only the former are settled and safe kept at Misr Company for Central Clearing, Depository & Registry (MCDR) Securities are traded on the Egyptian Stock Exchange (EGX) or over-the-counter (OTC) and settle on T+1 All treasury bonds are held at MCDR In addition to pension assets, the mutual fund sector invests its funds in equities, fixed income and money market instruments There is an active insurance industry with substantial assets. Banks are the largest holders of fixed income securities An interbank spot and forward market is active onshore up to 1 year, but conversions of EGP into hard currency must be linked to commercial or investment transactions 11

12 Kenya The Kenyan Government encourages foreign investment Kenyan government securities include T-bills and government bonds Government bonds are traded on the Nairobi Stock Exchange (NSE) The Central Bank of Kenya is the principal issuer of both Treasury Bills and Treasury Bonds The Kenyan Government has issued Fixed Coupon/Rate Bonds, Zero Coupon, Floating Rate, Infrastructure (project specific), Restructuring/Special bonds and Amortized bonds. Most commonly issued bonds are zero coupon and fixed coupon bonds Treasury bills are issued weekly, Treasury bonds are issued monthly Foreign investors may participate freely in the money and capital markets in Kenya There are no restrictions on transactions relating to the current and capital accounts and no foreign exchange controls. Residents and non-residents may hold foreign exchange accounts The Kenyan Shilling (KES) is a free-floating currency that is fully liberalized and convertible 12

13 Ghana Continued reforms are vital Non-residents are allowed to invest in the long-end of the domestic capital market, with tenor of three years and above Non-residents are permitted to maintain foreign currency accounts with domestic banks, which can be credited with transfers in foreign currency from abroad or other foreign currency accounts Ghana has a growing investor base, with assets in pensions, mutual funds and insurance Foreigners may invest in securities listed on the stock exchange without exchange-control restrictions Banks are the main holders of government securities with more than 50 % of all securities issued, foreign investors hold 20 % of government securities Ghana operates a flexible exchange rate regime, with occasional Central Bank intervention The exchange rate is determined through the interbank foreign exchange market on the basis of average rates as reported by authorized dealers and foreign exchange bureaus on a daily basis 13

14 Uganda The Ugandan government wants to attract foreign investment The foreign exchange market and capital account controls have been fully liberalized Residents and non-residents may hold foreign exchange accounts without restrictions on capital transfers Government securities include T-bills and government bonds which are traded in the OTC market Treasury Bonds are auctioned every 28 days. The bonds support monetary policy implementation by improving liquidity management and promoting market development The government s bond issuance calendar is published at the beginning of the financial year, with indicative amounts to be issued. A primary dealer system is in place, with six banks as members; primary dealers can bid for Treasury Bonds at auctions and handle bids from other purchasers, but they do not make any profit on those bids The Central Bank auctions treasury bills and bonds up to maturities of 10 years. Investors can purchase foreign exchange and make transfers at commercial banks without the approval of the Central Bank. Profits, dividends, royalties and interest payments can be remitted without restrictions or limitations Uganda has managed a float exchange rate regime and, the Bank of Uganda (BoU) regularly intervenes to stabilize the Ugandan Shilling (UGX) 14

15 Tunisia Progress has been made in lowering barriers to foreign investment Government securities include T-bills, traded in the OTC market, and government bonds, which are traded both onexchange and in the OTC market Tunisia s capital markets are small and dominated by government securities The issuance of long term government debt is an important part of Tunisia s financing strategy, particularly for longerterm projects The largest sectors of Tunisian investors are the mutual funds, which invest in fixed income and equities The TND follows a managed floating exchange rate regime and is officially convertible for all current account transactions. The TND is pegged to a basket of the currencies of Tunisia s main trading partners. The EUR has the largest share of the basket, as most of Tunisia s trading partners are EUR zone countries TND rates are freely set through interbank transactions by commercial banks 15

16 Zambia Zambian bonds are issued with a short tenor Government bond issues are handled by the BoZ The bonds are listed on the Lusaka Stock Exchange (LuSE) Treasury bills and bonds are traded OTC The BoZ is the only issuer of government debt Individuals and corporate institutions are eligible to participate in the primary auctions of government bonds The BoZ maintains and processes all government bond transactions through the Book Entry System (BES) Government bond tenders are held once a month (usually every third Friday) The BoZ applies the multiple price system (Dutch auction) to price government bonds Commercial banks are the dominant holders of domestic debt, accounting for 57.6 %. The remainder is almost evenly split between pension and insurance assets Investors are free to repatriate capital investments, interest, profit, dividends, management fees, technical fees, and royalties. Furthermore there are no controls on residents or nonresidents conducting business in the country, and no restrictions on non-cash transactions 16

17 Disclaimer This document is for informational purposes only, and is not an offer or recommendation to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. Further, none of the information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. Concerto Financial Solutions does not make any warranties or representations, express or implied, with respect to the timeliness, sequence, accuracy, completeness, currentness, merchantability, quality or fitness of the information and index data provided for any particular purpose. 17

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