Dual listing, doubly safe
You don’t even have to take your R2m out of the country
IT’S JUST AS SAFE, but much more profitable, to buy the shares of six local companies that have moved their primary listings to the London Stock Exchange (LSE) on the JSE in rand as by a deposit in sterling in London. The LSE rules governing the transfer of shares and the currency they trade in apply at all times.
No local authority, such as a dictator, or even an overenthusiastic minister of finance or governor of a reserve bank, in any country, can ever lay his hands on these shares or the return on them.
Monica Singer, CEO of Strate, the organisation specially created as custodian of all listed shares on the JSE, this week said repeatedly in an interview with Finweek that she and her counterpart in London, where the shares have their primary listings, can, by simply pressing a button, transfer the local person’s ownership of these dual-listed shares, which were bought on the JSE, to the London register.
She says the LSE rules apply at all times and there’s no way any local authority can prescribe to the LSE what it must do with the beneficiary’s shares or the income earned from selling them.
Many years ago – and some vestiges of it remain – there were strict rules governing foreign exchange. For example, if Anglo shares on the LSE were bought by someone in Britain using sterling, the foreign-exchange regulations, which were strictly enforced by the SA Reserve Bank, required that that share certificate get a non-resident’s stamp. The shares could then be sold on the LSE for sterling. The Anglo shares bought on the JSE didn’t get this stamp, and those who bought them couldn’t sell them for sterling on the LSE.
Now all civilised share markets are paperless. If you buy shares in a local company, such as Astral, on the JSE, you can only be paid in rand when you sell the shares. The same principle is assumed to apply to money if you buy shares in one of the dual-listed companies, such as Anglo, on the JSE.
It’s recorded by Strate that the Anglo shares bought on the JSE for rand belong in SA. Theoretically, it would therefore be possible for a local government to seize the shares. “No,” says Monica Singer, “I will press the button that will transfer these shares from the SA or Strate register to the LSE.”
Anglo, Billiton and Old Mutual, to mention a few, have plc after their name. That means they are British companies. Their primary listings are on the LSE, and no other country can prescribe to these companies to whom or what their shares may be transferred. It’s good to know that in practice there’s a button that can be pressed and that the person in control of the button is prepared to push it, thereby putting the right of the company that issued the shares, the stock exchanges involved in the marketing of these shares and the rights of the investor first at all times.
The existence and the possibility of pressing the button also puts a new perspective on the old fear that many people have concerning the R2m that can legally be taken out, and is then often invested ineffectively and at high cost overseas.
The six dual-listed companies in the table in effect offer any local investor as much diversification as he would like. The peace of mind that the shares can be traded for sterling on the LSE in the event of some catastrophe in SA is merely the cherry on top.
The table shows that the share prices of all six companies fared better over the past two years than the FTSE 100, the index of the Top 100 companies on the LSE.
If foreign exchange is perhaps eased further by Trevor Manuel in his Budget speech next week, or is hopefully lifted altogether, local investors should think twice before they transfer new rand to an account in sterling at a British bank. It’s much better to buy one of the six shares in the table – you could add Richemont, with its primary listing in Switzerland.
Your money is just as safe from possible future eager hands as if it were lying in a British bank, earning a couple of percent in interest. The management fee for your international shares is also only a fraction of what professional asset managers charge.
The table, which was simply compiled from graphs, gives a new indication of how the six local names, which now have primary listings in London, fared over the past two years compared with the FTSE 100. For convenience, we looked at the present value of an investment of £100 two years ago.
Ready to push the button if necessary. Monica Singer