African stock exchange A2XMarkets launched on 6 October 2017 with three listings and four of the industry’s leading brokers on board.After just two years, A2X boasts a combined market cap of about R2 trillion with nine approved brokers, including 5 of the 6 largest brokers in South Africa.
Real estate investment trust, Fairvest Property Holdings, listed on A2X on 31 October, bringing the number of listings on the exchange to 32. It was also recently named best new stock exchange in Africa in the 2019 Global Banking & Finance Awards.
Kevin Brady, CEO of A2X said, “We are very excited about how the business has developed over the past two years. Starting an exchange to compete with an incumbent that has been a monopoly for over 130 years was never going to be easy but through the use of technology, an experienced team, support from many industry players and perseverance, we have managed to overcome the many barriers to entry. Testament to this is that from inception to the end of October, we had recorded over 29 000 trades with a combined value of some R2 billion.”
Brady says that one of the major challenges that A2X has faced is broker infrastructure, which was inadequate for a multi-venue environment. “Integrating into legacy systems geared for a single exchange environment is challenging. However, we are pleased to report that many brokers are re-engineering their systems as they see the value of doing so and the problems of being tied to only one exchange.”
To help overcome many of the infrastructure obstacles, A2X has a joint venture with a local tech firm to develop a post trade system. This will make it both cost effective and easy to trade client orders across both markets. The system is being rolled out to select brokers and is expected to be in full production by the first quarter of next year.
A2X offers an alternative platform for companies or issuers of exchange traded products to secondary list their shares or units for trade. There is no cost, risk or additional regulation to do so.
After two years of operation, the savings of an alternative low-cost platform are clear. Brokers can extract savings of 50% on exchange fees and lower friction costs drive a better-quality market as measured by narrower spreads and increasing liquidity. These savings flow to the brokers and investors and are estimated to be upward of R1.2 billion per year.
Brady continues, “There is no doubt that the industry is increasingly seeing the benefits of having choice to trade across markets. In October, A2X recorded its seventh record month for the year.”
“Trading on A2X has benefits for issuers as well as brokers. . A secondary listing on A2X complements an issuer’s primary listing. It provides investors with a choice of venue on which to transact and a lower cost venue. Many companies are going the extra mile for their shareholders and also support the development of a more progressive and competitive market place in South Africa.”
“The pipeline of potential companies listing is strong and we are pleased at the high quality, high profile companies which have and are considering listing. We were clear from inception that the A2X model aligns with the objective of growing and improving the overall market in South Africa – lowering costs, improving liquidity and being both innovative and responsive to market needs,” he says.
Brady concludes: In terms of the focus for the next two years, A2X will grow is product range, continue to offer investors an alternative low-cost venue on which to transact while progressing capital markets in South Africa.”
A2X has listings from many sectors, including media, mining, banking, property, retail, pharmaceutical, FMCG, financial services, healthcare, insurance, mining, telecommunications, ETFs and ETNs.
A2X is regulated by the Financial Sector Conduct Authority and the SARB Prudential Authority in terms of the Financial Markets Act.
Dollar firms after U.S. yield spike, hits six-month high versus yen
By Kevin Buckland
TOKYO (Reuters) – The U.S. dollar touched a fresh six-month high versus the yen and extended a rebound from a three-year lows to the Aussie on Thursday, lifted by a sharp increase in U.S. bond yields overnight.
Government bonds, and particularly U.S. Treasuries, have become the focal point of markets globally, after traders aggressively moved to price in earlier monetary tightening than signalled by the Federal Reserve and its peers.
Asian stocks extended a global equity sell-off, with risk appetite souring as the surge in yields fomented inflation worries. Emerging-market and commodity-linked currencies continued to retreat Thursday, while cryptocurrencies stabilised after tumbling overnight.
“The market has gotten more and more confident about how strong the global economy could look in the second half of the year, and implied in that is increasing skepticism that central banks will be able to honor the promises they’ve given that rates are not going anywhere,” said Ray Attrill, head of forex strategy at National Australia Bank in Sydney.
“The decline in bonds spooked equities,” leading to “classic U.S. dollar safe-haven support,” he said.
The dollar index edged up to 90.38, holding on to a 0.2% rise from Thursday, when it rebounded from losses of as much as 0.26% before the bond tender. That leaves it down less than 0.2% for the month, following January’s 0.6% gain.
The greenback was little changed at 106.165 yen after earlier touching 106.43 for the first time since September. It has strengthened 2.8% this year after the first back-to-back monthly increases since mid-2018, putting the yen among the worst performing major currencies in 2021.
Both the dollar and yen are traditional haven currencies, but the yen tends to decline when U.S. yields rise, whereas the dollar tends to strengthen.
Bond yields have climbed this year on the outlook for massive fiscal stimulus amid continued ultra-easy monetary policy, led by the United States.
An acceleration in the pace of vaccinations globally has also bolstered what has become known as the reflation trade, referring to bets on an upswing in economic activity and prices.
In recent days though, a rise in inflation-adjusted bond yields has accelerated, indicating a growing belief that central banks may need to pare back ultra-loose policies, despite their dovish rhetoric.
“The fixed income rout is shifting into a more lethal phase for risky assets,” after initially being interpreted as a “story of improving growth expectations,” Westpac strategists wrote in a client note.
“It appears to be the case that bond markets are ‘taking on’ the central bankers’ world view, and standing in front of the current momentum is unwise.”
The benchmark 10-year Treasury yield surged above 1.6% overnight for the first time in a year, after an auction of $62 billion of 7-year notes was met with weak demand.
The Australian dollar continued its retreat after topping $0.80 on Thursday for the first time since February of 2018, declining 0.6% to 0.78195.
New Zealand’s currency dropped 0.4% to $0.7336 after reaching $0.7463 Thursday, a level not seen since August 2017.
The Canadian dollar weakened 0.1% to C$1.2620 after falling from its own three-year top to the greenback at C$1.2468 overnight.
The euro slid 0.2% to $1.21475 after touching a seven-week high of $1.22435 on Thursday.
Cryptocurrencies remained lower after tumbling overnight. Bitcoin changed hands at $46,443 following Thursday’s 5% slide, while ether traded at $1,473 following a 9% drop.
(Reporting by Kevin Buckland; Editing by Stephen Coates)
Shares and commodities keep climbing, so do bond yields
By Marc Jones
LONDON (Reuters) – World stocks headed back towards record highs with a third day of gains and the dollar dropped to a three-year low on Thursday, after top Federal Reserve and European Central Bank officials took aim at rising bond market yields.
There was a lot to keep tabs on. A renewed retail frenzy re-ignited the likes of GameStop, bets on $70 a barrel oil and a decade high in copper prices drove a commodity currency rally [/FRX] and bond yields were still rising too. [GVD/EUR]
A near 1.9% jump in oil and gas shares ensured European markets followed Asia’s overnight gains [.T][.SS]. MSCI’s main world index, which spans 50 countries, was up 0.5%.
“There are two clear stories now” said CMC Markets senior analyst Michael Hewson. “You have the concerns about rising yields and they are continuing to move higher today, and then you have got an economic recovery story, which is helping lift the more moderately-valued parts of the market.”
Federal Reserve Chair Jerome Powell said on Wednesday that U.S. rates could remain low for years, while ECB board member Isabel Schnabel was out early on Thursday saying it would fight any big increases in inflation-adjusted market rates.
“A too-abrupt increase in real interest rates on the back of improving global growth prospects could jeopardise the economic recovery,” she said. “Therefore, we are monitoring financial market developments closely.”
But bond markets are still not playing ball. Ten-year German Bund yields climbed 3 basis points in early trading. U.S. 10-year Treasury yields were near one-year highs at 1.42% and on course for the biggest monthly rise since Donald Trump’s 2016 U.S. election victory jolted markets.
In the FX markets, the safe-haven U.S. dollar slumped near three-year lows as the Fed’s stance, ongoing progress with COVID vaccination programmes and commodity market uplift boosted riskier currencies.
The Australian and Canadian dollars both hit three-year highs of $0.7978 and C$1.2503 per U.S. dollar respectively.
The euro touched a one-month high of $1.2183. The safe-haven yen and Swiss franc both weakened.
“It is pretty clear that there is a pretty strong concentration in the commodity currencies,” said Saxo Bank’s John Hardy. “Even with emerging markets you are seeing it to a degree,” he added, pointing to how big energy importers like Turkey’s lira had faded.
MARATHON NOT A SPRINT
Crude oil climbed to 13-month highs after U.S. government data on Wednesday showed a drop in crude output as a deep freeze in Texas disrupted production last week. [O/R]
Copper prices steadied near $9,500 a tonne in London. It’s now at its highest level in almost a decade and could log its biggest monthly gains in 15 years this month.
In a possible sign of a renewed retail-driven frenzy in equity markets, GameStop’s Frankfurt-listed shares trebled as they opened on Thursday, overshooting the videogame retailer’s 100% surge on Wall Street overnight.
Other so-called “stonks” – an intentional misspelling of “stocks” – favoured by retail traders on sites such as Reddit’s WallStreetBets had also leapt again, although explanations for the moves were tenuous.
Some online stocks watchers had even pointed to a picture posted by an activist GameStop investor of a McDonald’s ice cream cone with a frog emoji as a cryptic sign.
“It’s a marathon, not a sprint. Whatever happens resist the urge to sell. The longer we hold the higher it goes,” said @catchme1fyoucan, one user in Italy of the retail trading platform eToro, in a discussion on GameStop.
(Reporting by Marc Jones, editing by Larry King)
Sterling steadies above $1.41 as risk currencies gain
By Ritvik Carvalho
LONDON (Reuters) – A rally in risk currencies on Thursday helped Britain’s pound steady near $1.41, a day after it hit its highest levels in nearly three years.
Sterling surged to $1.4295 on Wednesday, as analysts maintained a positive outlook on the currency.
Bets that Britain’s vaccine rollout will enable a quicker reopening of its economy and relief over a Brexit trade deal have pushed the pound up 3.5% against the dollar, making it the best-performing G10 currency this year.
U.S. Federal Reserve Chair Jerome Powell on Wednesday calmed fears that higher inflation would also lead to a tapering of monetary stimulus, saying the central bank would not change policy until the economy was clearly improving.
On Thursday, a broad risk-on tone in markets after Powell’s assurances spurred a rally in commodity-linked currencies such as the Canadian, Australian and New Zealand dollars and the Norwegian crown, pushing the dollar and other safe haven’s lower. [FRX/]
“Classical FX havens are weakening (CHF, JPY) and risk currencies such as GBP and NOK are performing well as U.S. rates are now rising in tandem with equities and commodities,” said Lars Sparresø Merklin, senior analyst at Danske Bank.
The pound is correlated with risk and growth and tends to gain along with risk-on plays in markets. It traded 0.1% higher at $1.4163 by 0911 GMT. It was 0.1% lower to the euro at 86.22 pence.
Issues over Brexit still simmer, although analysts maintain they won’t hurt the pound in the short to medium-term.
Northern Ireland’s first minister upped the ante on Wednesday in a dispute between the UK and the European Union over trade with the province, calling on Prime Minister Boris Johnson to “step up and protect the United Kingdom”.
Earlier, the UK and the EU held talks and agreed to press on with work to resolve the difficulties that have impeded deliveries of goods, notably food, from other parts of the United Kingdom to Northern Ireland and caused some shortages in supermarkets.
The dispute, which was heightened when the EU involved Northern Ireland in a COVID-19 vaccine ban, has cast a shadow over a post-Brexit trade deal agreed late last year and threatens to further sour future ties between the neighbours.
(Reporting by Ritvik Carvalho; editing by Larry King)
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