BY MICHAEL EBOH, PROVIDENCE OBUH & FAVOUR AGBI
The Nigerian Stock Exchange, NSE, has announced plans to increase the number of products traded on its platform to five within the next five years.
Speaking during the listing by introduction of SIM Capital Alliance Value Fund on the NSE, Chief Executive Officer of the NSE, Mr. Oscar Onyema said that in addition to equities, the NSE is targeting promoting trading in bonds, exchange traded funds, options and financial futures.
According to Onyema, the commencement of trading on these new products will help in achieving the much talked about deepening of the Nigerian capital market and also help increase the competitiveness of the market among its peers in the global community.
He said, “Deepening the market and enhancing liquidity are important strategic goals of the NSE. In this regard let me use this opportunity to reiterate some of the pertinent key initiatives of the Exchange.
“Market deepening is a major priority. Promoting closed-end funds is a major area of focus. In addition, we intend to offer five products in five years. In addition to equities, our aim is to promote active trading in bonds, exchange traded funds, options and financial futures.
“These initiatives are a vital part of increasing the vibrancy, depth and competitiveness of The Exchange so we can truly become the undisputed gateway to African frontier markets.”
Onyema applauded the issuer, SIM Capital Alliance and other parties connected to the listing of the fund, saying that the fund, which is a closed-ended fund, affords investors the opportunity to enjoy the diversification benefits of a mutual fund while also benefitting from the enhanced liquidity that results from continuous trading.
Speaking further, he said, “Of course, as with any other actively traded security, the Fund Manager has a responsibility — to ensure a steady flow of information to the market on fund composition, strategy and performance. Second, a closed end fund provides investors with another investment option, thus deepening the offerings in our market.”
He explained that the listing of the fund at N103.50 per unit follows the company’s conduct of an initial public offering of 50 million units of N100 each.
He added: “We are all familiar with the many mutual funds that have memorandum quotations on our market. There are currently 26 memorandum quotations on the Exchange.
With a memorandum quotation, the Fund Manager is supposed to calculate the bid and offer prices of Fund units on a daily basis at the close of business, based on the manager’s calculation of the value of the basket of equities that constitute the Fund, that is, the net asset value.
“These prices are then submitted to The Exchange and form the memorandum quotation portion of the Daily Official List. Units in the fund are bought and sold directly from the Fund Manager. These funds are open ended; the Fund Manager is free to issue more units in the Fund as demand dictates.
“With a closed end fund, such as we are listing today, the Fund itself is listed on the main board of the Exchange, and thus the units of the fund are fully tradeable on an exchange, in exactly the same way as equities are traded. “
Thus, SIM Capital Alliance Value Fund was listed today at N103.50 and trading has commenced. An investor wishing to purchase or sell units of the fund simply places an order through their stockbroker at any time.
“The units trade continuously and the investor does not rely on periodic valuations provided by the fund manager. As with the more familiar open-ended funds, closed end funds can be either equity funds (such as the SIM Capital Alliance Value Fund) or bond funds.”