An Angolan stock exchange -- planned for launch later in the year -- will have the makings of an African giant, according to an assessment by the Pan-African Imara financial services group.
In a statement on Monday, Imara said a study by its Angola chief executive Anthony Lopes Pinto suggested that the planned bourse -- the Bolsa de Valores e Derivativos de Angola or BVDA -- had the potential to become the third largest in sub-Saharan Africa after the South African and Nigerian stock exchanges.
"Efforts to obtain a sovereign credit rating in order to access international debt markets are well under way, and should reinforce long-term stability and result in a deepening of the market." He said diversification of the economy away from oil continued apace and, commendably, the government had recently appointed Ernst & Young to eliminate fiscal inefficiencies.
"With the financial crisis now firmly behind us, we anticipate the opening of the Angolan bourse this year."
He said this would augment the national savings rate, creating alternatives for Angolan companies in need of growth capital.
"Such a move will also attract foreign portfolio inflows, which globally have recovered strongly." His assessment of the potential strength of an Angolan bourse considered two scenarios -- a top-down macro view and a bottom-up appraisal with tight focus on 14 likely initial public offering (IPO) candidates.
"The broad view considers Angola's estimated gross domestic product of $84.9 billion (R632 billion) and the capitalisation of African stock exchanges relative to GDP (an average of 42 percent)."
This calculation suggested that the BVDA could have a market capitalisation of US36 billion, nearly three times the size of Kenya's well-established stock market.
A US36 billion Angolan stock market would still be dwarfed by South Africa's JSE, with its 331 listing companies and total market cap of US801 billion.
"But it would not be too far behind the Nigerian market, with 195 listings and a capitalisation of US39.67 billion," Lopes Pinto said.
In comparison, Angola's southern African neighbours Botswana, Zimbabwe and Zambia would be stock exchange minnows.
"Botswana's exchange has a market capitalisation of only US4.18 billion, with Zimbabwe down at just US3.6 billion, though Zambia is a little higher up the market cap league table at US15.23 billion."
After considering macro potential, Imara's Luanda CEO sketched a much more conservative picture based on research of 14 companies that might become initial BVDA members.
This snapshot covered 10 banks (with a projected market cap of US3.99 billion), two brewers (US2.90 billion) and two telecoms (US4.39 billion).
"Even this minimalist assessment suggests a total market capitalisation of about US11.28 billion is achievable."
"We believe this to be the tip of the iceberg. We understand up to 50 companies have been identified as IPO candidates," Lopes Pinto said.
As this was not an exhaustive list, he said his conclusion could be viewed as most conservative.
"Further, our valuations are diluted in large measure by the fact that sub-Saharan equity markets (with the exception of South Africa) still lag the recovery witnessed in emerging markets."
Nonetheless, a US11 billion market would still feature prominently in Africa's top ten, Lopes Pinto said. - Sapa