Thursday, October 28, 2010

Sound Issuance - South African ECM Gets Noticed on the Global Stage

South Africa has been the sleeping giant of emerging markets for many years. While emerging European equity capital markets issuance was rampant from 2005 on, South Africa was a rare source of interest. Yet volumes are climbing while Russia slumbers and 2007 totals are now in sight.

Extracts from the International Financing Review (IMF), circa October 2010:

The sound of vuvuzelas has passed in South Africa following the world cup, but the country is now buzzing to a different sound: visiting equity capital market bankers rushing around to pitch to potential issuers. Bankers are keen to ensure they are involved in the resurgence in emerging market activity.


“Government policy and black empowerment has facilitated the emergence of a broader middle class and a redistribution of wealth,” said George Pavey, co-head of emerging markets ECM at Credit Suisse. “Robust population growth and an emerging middle class, coupled with a rebound in demand for commodities, are fuelling economic growth and helping the performance of South Africa’s equity market.


“South Africa has emerged from the financial crisis as a winner, attracting a disproportionate share of inflows into emerging markets courtesy of the quality of many companies in SA, the strong corporate governance, transparency, relatively conservative balance sheet structures. South Africa is a lower beta market, but it is a good place to put money,”


The positive mood is reflected in the build out of investment banking operations. While Credit Suisse had no bankers in the country three years ago, it is now in the process of building a team of around 60 bankers to cover Southern Africa. In 2007 South African ECM volume was strong with nearly US$8bn raised through 24 deals. As a relative measure in the same year, UK volume was about US$50bn. However the importance of South Africa dropped in 2008: the number of deals was flat but volume dropped to US$3.7bn, putting the country sixth against the rest of Africa and the Middle East. Significantly, the number of deals rose to 36 in 2009, thanks to a stream of rights issues, and the year to-date total in 2010 is already flat to the full-year of 2009.

There are also some comments about the two biggest listings this year, Life Healthcare and Optimum Coal.

Real the full article here.