THE ROLE OF DEALERS & INVESTMENT ADVISORS
IN THE CAPITAL MARKET
A Presentation ByMS ABENA AMOAH, EXECUTIVE DIRECTOR
SASStrategic African Securities Ltd
2nd Ridge Link, North RidgeP O Box KA 16446, Accra
Tel: +233 21 251546 – 9, 7011770 Fax: +233 21 251550, 7011774Email: [email protected] Website: www.sasghana.com
MAY 27, 2004
AGENDA
Introduction
Capital Markets’ Structure
Dealers & Investment Advisors
Popular Misconceptions
The Media & Dealers/Advisors
INTRODUCTIONSuccessful business environments require vibrantcapital markets, which must provide funds that:
Are Readily Available
Are Easily Accessible
Are Relatively Cheap (Properly Priced)
Have Adequate Terms to Maturity
Can Be Re-Packaged and Exchanged
CAPITAL MARKETS’ STRUCTURE
Users of Funds
Providers of Funds
Dealers & Advisors (Middlemen)
Instruments/Products
Regulators Investor
Regulator
Dealer
Advisor
Seeker
Product
USERS OF FUNDS
Companies seeking growth, launching new products, retiring debt, start-ups
Municipalities undertaking projects
Investors wishing to realise their entrepreneurship
Mutual Funds & Unit Trusts
Governments
PROVIDERS OF FUNDS
Individuals/General Public
Pension & Provident Funds
Mutual Funds & Unit Trust
Venture Funds
Government
INSTRUMENTS/PRODUCTS
Bonds
Ordinary or Equity Shares
Preference Shares
BONDS
Long-term loans issued by credit worthy institutions
Issuer pays periodic interest to investors
Principal amount paid back to investors at maturity
Very limited market in Ghana. Examples of corporate bonds issued are HFC bonds, SSNIT educational bonds, GGiLBs
Confer ownership in business
Give voting rights in General Meetings
Give right to dividends out of profits
Can be issued under private placement
Issued to general public under a public offering
ORDINARY SHARES
PREFERENCE SHARES
Provide investor with larger dividend
Limited voting powers at general meetings
Often convertible into ordinary shares or redeemable
Rules & Institutions that ensure orderly &
fair dealing in capital markets, especially
where it involves public funds:
Rules include SIL, LI 1728, GSE Rulebook
Institutions: SEC, GSE, BoG
REGULATORY ENVIRONMENT
Firms and Individuals licensed by regulators to:
Provide Investment Advice
Design Financial Products
Trade in Financial Products
Provide Investment Management Services
DEALERS & ADVISORS
Minimum Capital
Quality of Officers
Periodic Reporting
Continuous Development Requirements for Re-licensing
LICENSING REQUIREMENTS
WHAT DEALERS/ADVISORS DO
Trade in securities on the stock exchange
Maximise wealth, minimise losses for investors
Jan – Apr 04 2003 2002 2001 2000
Volume, mil 20.64 96.33 44.12 55.30 30.72
Value, ¢bil 104.89 389.30 89.41 92.28 50.62
At 24/05/04 2003 2002 2001 2000
GSE Performance
92.05% 154.67%
45.96% 11.42% 16.55%
WHAT DEALERS/ADVISORS DO Raise Capital For Institutions/Government
Year Issuer Instrument $ Million
1990 Government of Ghana Debt 13.80
1992 Accra Brewery; Super Paper Products Equity 4.70
1994 Mechanical Lloyd; GoG (AGC); UTC Estates Equity 68.80
1995 HFC; GoG (PAF); SSB; PZ Equity 18.00
1996 GoG (GCB); GGL, HFC; Aluworks Equity/Debt 29.50
1997 Mechanical Lloyd; HFC Equity/Debt 3.13
1998 HFC; Accra Brewery Equity/Debt 8.66
1999 HFC; Metalloplastica Ghana Equity/Debt 4.56
2000 GoG (PBC); Accra Brewery; HFC Equity/Debt 60.66
2001 Home Finance Company Debt 1.72
2002 HFC; Sam Woode Equity/Debt 5.59
2003 GoG (CPC); CFAO; Ghana Breweries Equity 30.07
2004 Accra Brewery; Clydestone Equity 5.29
TOTAL 254.48
Provide investment advice Design and market products like
mutual funds, unit trust, etc Undertake and publish investment
research Provide investment management
services Provide input into capital market laws Undertake public education
WHAT DEALERS/ADVISORS DO
OTHER LICENSED OPERATORS
These include:
Registrars
Trustees
Custodians
BY INVESTORS:
Market is only for rich people with huge sums to invest
Advisors are expensive Stock market investments are
speculative highly-risky investments I can only buy shares during IPOs I should frame my share certificates My long-term savings must be in
short-term investment products
POPULAR MISCONCEPTIONS
POPULAR MISCONCEPTIONSBY COMPANIES THAT SHOULD LIST:
My company will be taken over if I list
Listing is very expensive The market can’t supply the amount I
want to raise My company is worth more, past
financial performance is not important in valuing my business
I have no further obligations to the public after an IPO
Investigative financial journalism
Accurate reportage of financial news
Partners in public education
Investors
Continuous education
MEDIA & DEALERS/ADVISORS
