African bourses must link-up to meet investors demand: JSE

Updated 08 December 2012
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African bourses must link-up to meet investors demand: JSE

JOHANNESBURG: Africa's stock markets must better collaborate to make the most of historic levels of investor interest in the continent, the head of the Johannesburg Stock Exchange told AFP yesterday.
"The appetite for Africa is very very high," said Nicky Newton-King, making the case for better links between the continent's 24 bourses as a means of propelling Africa's recent and dramatic economic rise.
The International Monetary Fund forecasts the aggregate economy of sub-Saharan Africa will grow at around 5.7 percent next year, presenting a massive economic opportunity of the type the region has too often squandered.
"I think everybody is trying to find their way, to participate meaningfully in that rising," said Newton-King, who took over at the continent's largest exchange in January this year.
"All of us who are privileged enough to run exchanges, need to figure out that these waves of investor appetite aren't yours by right. Once they come you have to be able to ride them properly."
"We should not be taking this as business as usual, this is a business opportunity."
According to Newton-King one way to ride the wave of interest would be to make it easier to invest across Africa's borders and to improve liquidity in small markets — making a big enough pool that assets can be bought and sold quickly.
To that end the JSE is looking to ink deals with two other bourses in the region.
But for now, those deal will focus on improving the continent's financial plumbing — allowing cross and dual listings and easier order-routing — rather than the creating one pan-African exchange.
"I think it is far more about collaboration," she said.
"Were we not to have any exchanges on the continent I think we would have wanted to create a single exchange that would service multiple jurisdictions out of one legal base."
"That's the most efficient way to do it, but I'm a bit of a realist."
"Once you try to do cross border mergers and acquisitions, you run into much more trenchant issues of a regulatory nature, all of which stem from 'how do we protect the local investor?', 'how do we make sure the local market grows?"
Newton-King insists that allowing Kenyans to invest in joint-listed South African stock in shillings, or by allowing South Africans to more easily place orders for Nigerian stock, markets would attract more foreign investors.
"Really big trades are not going to go to illiquid markets."
"The average days trade on the JSE is more than the average annual trade on Kenya and Mauritius put together. There are amazing companies in both of those countries."
Despite political concerns about the erosion on sovereignty that could come with more integrated markets, Newton-King says South Africa's own experience demonstrates the benefits.
"When Anglo-American cross listed in London, the amount of trades in Anglo-American increased. South Africa's percentage of trade in Anglo-American decreased, but the decreased percentage was worth more."
"In those cases you have to think quite bravely."


Starbucks blames slower China growth on drop in third-party delivery orders

Updated 10 min 37 sec ago
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Starbucks blames slower China growth on drop in third-party delivery orders

SINGAPORE/SHANGHAI: Starbucks Corp. has reported a sudden slowdown in China growth just weeks after trumpeting rapid expansion in the country, citing a drop-off in unapproved third-party delivery services whose bulk orders had been clogging up its cafes.
The US cafe chain on Tuesday same-store sales would be flat to slightly negative in its second-biggest market in April-June, versus 7 percent growth a year earlier. The announcement was followed by a 9 percent drop in Starbucks’ share price.
China has been a sweet spot for Starbucks for the past few years, as the country embraces cafes and opens up to drinking coffee over tea while growth saturates back home. Last month, the firm said it aimed to triple China revenue and double cafe numbers to 6,000 by 2022.
But on Tuesday, the company said new cafe openings were cannibalizing customer visits at other stores, as also happened in the United States. However, Starbucks particularly noted a decline in third-party firms — with whom it had no formal arrangements — that placed large orders for delivery to their own customers, often resulting in long in-store queues.
“I think it was driven by the government to want to stop having third parties do that because it was creating annoyances,” Chief Executive Kevin Johnson said on a call with analysts on Tuesday. He said the remedy was to seal a delivery partnership with a “large tech company” by the end of the year.
Reuters was unable to confirm any government measures on the matter.
Third-party “daigou” shopping agents in China offer services via delivery platforms such as Ele.me, backed by Alibaba Group Holding Ltd, and Meituan-Dianping, backed by Tencent Holdings Ltd. Restaurants and cafes can also have official accounts on such platforms, though Starbucks does not.
Mizuho Securities analyst Jeremy Scott in a research note said Starbucks would have been happy for the no-cost custom generated by third-party delivery services, but an official arrangement will likely push up costs.
“While the Street may be willing to forgive a tough May ... the soft comp (comparable store sales) in China is more disheartening given that management is hyper-focused on the market,” said Scott.
Starbucks also on Tuesday said it planned to close 150 cafes in the United States and open fewer locations in its financial year beginning in October, in response to competition that has seen new coffee chains, convenience stores and fast-food restaurants improve quality and cut prices.