Cimerwa   06 april2010
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Cimerwa 06 april2010

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Cimerwa   06 april2010 Cimerwa 06 april2010 Presentation Transcript

  • “Understanding Capital Market In Rwanda” CIMERWA TUESDAY 6TH APRIL 2010 CAPITAL MARKET ADVISORY COUNCIL Presented by Olivier Kamanzi Dep. Executive Director, CMAC
  • OUTLINE  INTRODUCTION  FINANCIAL SYSTEM  WHAT IS CAPITAL MARKET  HOW DOES THE CAPITAL MARKET WORKS ?  PRIMARY MARKET  SECONDARY MARKET  WHAT IS ROTC MARKET / RWANDA STOCK EXCHANGE  WHAT ONE CAN BUY OR SELL ON CAPITAL MARKET ?  MEMBERS OF ROTC & COMMISSIONS AND FEES  BENEFITS TO INVEST & LISTING ON ROTC MARKET  WHAT IS AN INVESTMENT, WHY INVEST, AND WHO IS AN INVESTOR?  MONITORING YOUR INVESTMENT AND WHEN CAN YOU START INVESTING?  HOW TO OPEN AN ACCOUNT AND TRADING  RISKS INVOLVED INVESTING IN CAPITAL MARKET  HOW AM I PROTECTED ?  CMAC OPPORTUNITIES AND ADVANTAGES  CMAC MILESTONES ACHIED
  • INTRODUCTION  CMAC BACKGROUNG The Capital Market Advisory Council (CMAC) was established by the Prime Minister’s order No. 01/03 of 28/03/2007 with the purpose of guiding the development of the capital market in Rwanda. The Council is under the supervision of the Ministry of Finance and Economic Planning  CMAC VISION To be a key contributor to Rwanda becoming a competitive financial center regional and globally.  MISSION To nurture wealth by facilitating the development of an orderly, fair, transparent and efficient capital market  CORE VALUES Good Governance, Knowledge, Creativity and Innovation
  • FINANCIAL SYSTEM IN RWANDA  VISION 2020 The Financial Sector identified as crucial geared towards stimulating the economic growth of Rwanda  FINANCIAL SYSTEM ARCHITECTURE  MONEY MARKET – Regulated by BNR  CAPITAL MARKET – Self regulated  INSURANCE – Regulated by BNR  PENSIONS – Regulated by BNR  MICRO-FINANCES – Regulated by BNR  NATIONAL PAYMENT SYSTEM – Regulated by BNR
  • WHAT IS CAPITAL MARKET  A market for SAVINGS and INVESTMENTS. Brings savers and investors together.  Market for long term funds required to finance long term projects.  Section of the financial sector that mobilizes savings and channels them to the most productive sectors of the economy.  If investment is going to increase the wealth of a nation, it must be channeled into productive businesses.
  • ROLE OF CAPITAL MARKET IN THE ECONOMY Allocation of savings resources at the most efficient prices 2. Corporate governance i. transparency through disclosure ii. higher standards of accounting 3. Risk sharing through wide share ownership 4. Promote ease of access to finance as different users of capital can choose among different methods i.e. -commercial paper - shares -bonds -government bonds -municipal bonds
  • ROLE OF CAPITAL MARKET IN THE ECONOMY 1. Allocation of savings resources at the most efficient prices 2. Corporate governance a. Transparency through disclosure b. Higher standards of accounting 3. Risk sharing through wide share ownership 4. Promote ease of access to finance as different users of capital can choose among different methods i.e. a. Commercial paper b. shares c. Bonds – Government and Corporate d. Municipal bonds
  • ROLE OF CAPITAL MARKET IN THE ECONOMY 5. Promote growth of financial services to accelerate growth a. Insurance b. Pensions c. Collective investment schemes d. Funds Management and administration e. Banking f. Real estate & property g. Infrastructure development 6. Privatization 7. Widening ownership of business and spreading the risks and wealth of a nation among the households.
  • ROLE OF CAPITAL MARKET IN THE ECONOMY 8. Savings from diasporas. Easy to use capital market to tap nationals savings earned in foreign countries. 9. Attract FDI as capital market provide an exit window 10.Diversification from traditional economic activities like agriculture 11.Savings culture through public education in investments 12.Encouraging self reliance
  • HOW DOES THE CAPITAL MARKET WORKS?  3 Components: Issuers, Investors, and Intermediaries  Organized markets where buyers and sellers (Investors or the public) meet  A stock exchange or an OTC market has professional intermediaries.  Capital markets has two levels; A. Primary Market: to raise new capital B. Secondary Market: day to day trading of already listed securities.  Capital markets rely on; Rules and regulations Physical infrastructure  Companies disclose all useful information about their businesses
  • TRANSACTION FLOW – PRIMARY MARKET Issuer is admitted to list on the OTC Offer closes and announced and allotment follows Public investors subscribe to securities during the offer period Issuer states the offer period and offers securities to the public Issuer applies to list securities on the OTC market Issuer prepares draft prospectus or information memorandum Issuer appoints advisors sponsors / agents Issuer offers Decides to raise capital
  • SECONDARY MARKET Buyer client Member Stockbroker (Buyer) CMAC OTC Trading facilities Registration Member Stockbroker (Seller) Seller Client Market Report
  •  Market where transactions are negotiated between a buyer and a seller. How does the Rwanda OTC market operate?  A dual trading process  Members trade securities directly with investors and among themselves  Open outcry trading sessions are conducted at the trading floor of the OTC market. WHAT IS AN OTC MARKET
  • ROTC MARKET PERFORMANCE  The primary debt market raised a total of Rwf.15.2 billion. On secondary market a total of Rwf 643 million worth of bonds were traded in 52 transactions.  BCR 10 years, 9% coupon, Corporate Bonds  FXD1, 8%, 2 year, Treasury Bonds  FXD2, 8% 2 year, Treasury Bonds  FX3, 8.25%, 3 year Treasury Bonds  Cross listing of KCB: Turnover of Rwf 12million from 63,000 shares traded since 18th June 2009
  • The Rwanda Stock Exchange was established in 2005. It is a dormant company yet to be activated. It will be expected to run the trading operations of the Rwanda OTC Market. RWANDA STOCK EXCHANGE
  • Treasury Bonds Corporate Bonds Security Maturity Coupon Rate % Closing price 08/5/08 Rwf YTM % Prev. Price 07/5/08 Rwf. Bid Offer (Ask) Sales Rwf FXD1/2008/2yr 14/01/2010 8.00 100.250 6.912 100.00 - 102.00 5M FXD3/2008/3yr 31/01/2011 8.25 - - - - - - Bond Rate (TB) Maturity Closing price 31/1/08 Previous price 31/1/08 Bid Offer (Ask) Sales Rwf BCR 2yr FXD1/2008+ 1.00% 2017 102.2500 102.2500 - - - UNDERSTANDING THE MARKET REPORT
  • Shares and bonds WHAT IS A BOND?  A bond is a debt. WHAT IS A SHARE / EQUITY?  A share is a unit of ownership  Participate in the affairs  Your voting rights at the General meetings  A dividend income WHAT CAN ONE BUY ON ROTC MARKET?
  • 7 members Three categories of membership: Stockbrokers, Dealers, and Sponsors MEMBERS OF THE RWANDA OTC MARKET?
  •  Helps investors to either buy or sell securities  Acts as the middleman or intermediary between investors  Gives advice to investors  To qualify as a broker  Minimum education skills and professional qualifications WHO IS A STOCKBROKER OR BROKER/DEALER?
  • The current brokerage fees are:  Bonds (debt): First Rwf 5m……………1/8% Above Rwf 5m ………………..……negotiable Shares (equities): First Rwf 100,000...1.5% Above Rwf 100,000…………………………….. negotiable HOW MUCH COMMISSIONS OR FEES DO STOCKBROKERS OR B/D CHARGE?
  •  Savings  Income  Wealth or Capital gain  Securities as Collateral  Liquidity BENEFITS TO INVESTORS?
  •  Access capital  Discover the value of its business  Raise a company’s visibility and enhance its status with customers and suppliers at home and overseas  Have better bargaining position with financiers  Enhance management practices  Foster employee motivation  Benefits from Capital Market incentives  Use of shares as currency  Listed securities are easily acceptable as collateral against loans from financial institutions. BENEFITS TO ISSUERS OR LISTING ON OTC MARKET?
  •  Payday  Postponing your consumption today  savings WHAT IS AN INVESTMENT? WHY INVEST?  Creating wealth  It is impossible to create wealth without investing  Secure the future  Comfortable retirement  Investment is a time-honored practice for increasing your wealth
  • Anyone with Investment objective Time horizon for his investment Risk torelance Expectation of return and money to invest WHO IS INVESTOR?
  •  Actively follow or monitor his investment  Developments within the company you invested in  The stock market  The economy as a whole  Reading the business pages of the newspapers and listening to local FM station and TV MONITORING YOUR INVESTMENT?
  • NOW!!! WHEN CAN YOU START INVESTING?
  •  Open an account with a brokerage house  Making contact with a broker of your choice  Personal particulars HOW TO OPEN AN ACCOUNT? TRADING ?  Trading arrangement  Only through authorized Members (Stock brokers)  Trading is open to the general public
  •  Business risks  Behavioral risk / Counterparty risk  Poor or fraudulent  Market risks / Systemic risk  Price fluctuation(worldwide)  Perceived risk / Fear RISKS INVOLVED INVESTING IN CAPITAL MARKETS ?
  • CMAC ensures that only competent and credible professionals are licensed to serve the market. CMAC supervises all members of ROTC to ensure compliance with regulatory requirements CMAC ensures that prospectuses of issuers have adequate disclosure for decision making CMAC ensures that there are periodic reports and all price sensitive information are released once they are available National public education and awareness campaigns create well informed investors Developing a legal framework. HOW AM I PROTECTED?
  •  Stockbrokers;  Investment advisors;  Registrars; Fiscal agents;  Custodians; Data vendors; Credit Rating agencies;  Investment banks;  Venture Capital companies; Investment clubs;  Investment research houses; Financial analysts and journalists;  Financial Publications; Discount Houses (Treasury bills on Rwanda OTC market);  Fund managers and Asset managers;  Hedge funds.  Etc… CAPITAL MARKET OPPORTUNITIES?
  • Viability of projects determined by demand and supply. Liquidity and projects pricing is made possible through public participation Availability of information by investing publicly. CAPITAL MARKET ADVANTAGES?
  •  ROTC Market fully functioning (primary and secondary market)  7 Active Members  Legal Framework: Draft Law on Capital Market Authority, Draft Law Regulating Capital Market in Rwanda, Law Regulating Collective Investment Schemes – approved by the Cabinet  Policy Proposals  Privatization of Government Shares through the capital market  Fiscal and None Fiscal Incentives: set of incentives and recommendations aimed at stimulating the investment environment for the development of the capital market in Rwanda  CMAC Strategic Plan – 5 years  National Public Education and Awareness Program  Capacity Building – Training program for Market Participant and Staff  New Listing  Integration into East Africa Capital Market – Member of EASRA & EASEA CMAC MILESTONES ACHIEVED?
  • MURAKOZE CYANE