21 April 2017

Efforts to boost market participation and encourage new listings at the Tunisian Stock Exchange (Bourse des Valeurs Mobilières de Tunis, BVMT) are advancing, in line with new expansion targets announced in March.

Market capitalisation at the BVMT had reached TD19.3bn (€7.9bn) by the end of 2016, up 8.2% year-on-year (y-o-y). However, despite gaining ground, the Tunisian exchange continues to trail its peers, with a market capitalisation to GDP ratio of just 25% – well below that of Morocco’s Casablanca Stock Exchange, which stands at 55%. At 9%, the BVMT’s contribution to the economy is also modest when compared to the 40% average of European stock exchanges.  

Bid to boost IPOs

Heightening market activity will be pivotal if the BVMT is to meet new targets outlined by its general manager in March. Addressing a conference, Bilel Sahnoun said the exchange aimed to triple its contribution to the economy and more than double the number of listed companies from 79 at the end of last year to 200 by 2020.

While the last two years were subdued, bringing only three initial public offerings (IPOs), 2017 looks brighter, with seven companies slated to join the market in the coming months.

Furniture maker Atelier du Meuble Intérieurs and ceramic sanitary ware supplier Sanimed held launches in March, bringing the number of listed companies to 81, with industrial firms Misfat and Mecatech set to follow suit.

Support sought from the top

As part of its efforts to increase the number of public offerings, the BVMT is lobbying for greater input from the government in the form of partial privatisation of state-owned companies.  

Walid Saibi, general manager of Tunisie Valeurs, is confident that steps in this direction would help boost both the size of the market and liquidity levels, which, in turn, will attract more foreign investors.

“Tunisia already benefits from much international political support, but the government could attract more sustainable economic investment if it were to list state-owned enterprises,” he told OBG last year. “With robust supply and demand, frontier fund managers will begin to invest in Tunisia.”

The BVMT is also targeting small and medium-sized enterprises through the development of a programme titled Investia PME, which encourages smaller businesses to consider going public and offers them support through the process.

A separate campaign targets family-owned companies which, Sahnoun acknowledged, are often unaware of the full advantages of listing.  

He told OBG that while educating family firms on the benefits of going public was important, the introduction of incentives could also prove effective. “The government should also offer more tax cuts to companies that go public for the first five years after they launch an IPO,” he said.

The exchange’s efforts follow a year marked by low market activity. Trading values fell to TD2.8bn (€1.1bn) in 2016, marking a y-o-y drop of 31%, and have continued to slide in early 2017.

The current erosion of trade is widely seen as a sign of caution among small investors, who account for approximately 40% of investment, according to the Association for the Protection of Minority Shareholders (Association pour la défense des actionnaires minoritaires), fuelled by the challenging economic climate.

Looking to education and legislation

The BVMT is looking to initiatives such as the virtual trading game MyInvestia and Investia Academy, an online platform providing market and trading education, to expand the pool of market participants.  

Technical reforms earmarked for implementation this year are also expected to increase participation on the market. The changes, which are currently being reviewed by the regulatory Financial Market Board, will bring about extensions to both the bid-ask spread and trading hours at the exchange.

In addition, the BVMT will be hoping to benefit from a new investment law scheduled to come into force in the second quarter. Along with other reforms, the legislation will remove barriers that have prevented foreign investors from tapping key sectors. Sahnoun expects the share of market capitalisation held by foreigners to double from 24.45% once the law is in place.

Mourad Ben Chaabane, CEO of MAC, also welcomed the legislative overhaul. “The new investment law should draw in new investors and more foreign inflows, because it is expected to improve the business environment and create a new economic dynamic that will inevitably affect the entire economy, and by extension the stock market,” he told OBG last year.

© Oxford Business Group 2017