INVESTING IN SWAZILAND STOCK EXCHANGE
Swaziland Stock Exchange (SSX) Currently there are two types of securities traded on the Swaziland Stock Exchange (SSX): shares and bonds. There are seven companies currently listed on the main board of the SSX; these are: Nedbank, Swaprop, SBC Limited, Royal Swaziland Sugar Corporation, Swazispa Holdings, Swaziland Empowerment Limited, and Greystone Partners. These shares can be traded by the public including institutions.
A share is a unit of ownership of a company; so if you own a share of a particular company, then you are effectively a part owner of that company.
Organisations and companies may also issue debt instruments such as bonds on the stock exchange in order to raise capital for their activities. A bond is a debt instrument that guarantees the buyer a fixed or variable return (coupon) for a defined period of time; once that time has elapsed (maturity), the buyer is entitled to the face value of the bond. The Government of Swaziland may issue bonds and Treasury Bills from time to time through the Central Bank of Swaziland in order to finance government projects and activities. However, these are not yet available for purchase through the SSX. Who buys shares? Any person or organisation can buy shares on the stock exchange. Any amount can be invested in the stock exchange, but the minimum number of shares that can be bought is 100 shares. Bonds are usually sold in larger denominations so as to attract institutional investors.
Benefits of investing on the Stock Exchange
There are numerous benefits of investing in the stock exchange.
1. Capital Gains: The value of shares may rise or decrease depending on a number of factors such as: the performance of the company, the economic environment and outlook, demand and supply of the shares of the company.
If the company is performing well the value of the shares is likely to increase enabling the holders of the shares to make a profit when they sell the shares. The profit that is made from selling shares is known as capital gains.
2. Dividend Income: Investors contribute capital to companies by buying equity shares in exchange for an entitlement or share of the profits of the company.
The payment that is made to the shareholders is known as a dividend.
3. Ownership: Buying shares of stock means that you are effectively taking part ownership in the company in whose stock you are investing; you are a shareholder. Being a shareholder, you have the ability to vote on the appointment of corporate board members, and some business decisions.
4. Collateral: Once you purchase a share, you will be issued with a share certificate to prove your ownership of the shares. Share certificates can also be used as collateral for bank borrowing should you wish to apply for a loan from your bank.
How to buy and sell securities
Investors cannot deal directly on the SSX; they invest money through stockbrokers. Once a decision has been made about which securities to buy and how much to invest, the stockbroker will go to the next trading session at the stock exchange and execute the order, if available and at the best price obtainable at the time of dealing.
Once a deal has been sealed, the stockbroker notifies the client on the number of shares bought, price per share, commission payable and transfer fee payable for processing documentation through a brokers note.
Selling securities is the reversal of buying securities. The seller instructs a stockbroker to sell stock at an agreed price or within a set range. Stockbrokers A stockbroker is a licensed member of a stock exchange who buys and sells securities on behalf of clients.
They can also give advice on the securities. A commission called brokerage is charged for their services. There are currently two broking companies licensed as Dealing Members of the Swaziland Stock Exchange. These are Swaziland Stockbrokers Limited (SSL) and African Alliance Swaziland Securities Limited (AASSL) Share certificates Once a deal is concluded and the shares are paid for, share certificates are issued recording the name of the purchaser and the number of shares purchased. It is advisable that the Share Certificates be kept in a safe place. Share prices The price of shares is determined by the demand and supply of those securities. This is a result of the value the investors place on those shares.
If a company is expected to perform well for a certain period, then its shares are likely to be in demand as investors look at the prospects of a good dividend being paid out and the potential for realising capital gains. On the other hand, if a listed company is expected to perform badly, then its share price is likely to fall as investors want market related returns on their investments.
When forming an opinion about a particular share, the interested party is advised to analyse the financial reports of the relevant company.
The investor can also benefit by reading financial newspapers and magazines and should obtain as much information as possible about the intended investment.
By conducting a comparative analysis with the company’s competitors, the investor can gauge the success and marketability of those shares.
The broker may also assist with his expertise.
Publication of share prices
The prices are also available on the exchange website. The website address is http://www.ssx.org.sz
Article Originally published by the Swazi Observer
