Dual list­ing, dou­bly safe

You don’t even have to take your R2m out of the coun­try

Finweek English Edition - - Companies & markets - VIC DE KLERK

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


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