NBE looks into stock market

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The National Bank of Ethiopia (NBE) announced, yet again, that it commenced a study on the possibility of establishing a stock market (capital market) in Ethiopia.
NBE stated that it has started the study a few weeks back in order to launch a stock exchange in the country during a discussion held at the Hilton hotel attended by experts from the financial sector and representative of the central bank.
NBE representatives said that in the past year the central bank has finalized its study to establish secondary market in the country. “But we have gone back to our study and focus on a stock exchange that will include both the primary and secondary market,” an expert from NBE explained.
Two years ago, in relation with its issuing the national bond, the government had considered the establishment of the secondary market in the country, which is new for Ethiopia.
Representatives of the private sector and an expert who was present at the stock exchange study briefing disclosed that a market similar to secondary market used to exist in the 1960s during the era of Hailesellasie.
Ermias Eshetu, vice president of Zemen Bank, explained in his presentation that in relation with the growth of the country, establishing a capital market is very necessary.
At the discussion organized by the Addis Ababa Chamber of Commerce and Sectoral Association, Ermias said stock market is a market of confidence. Even though the sector is very valuable it has some monetary risks, he further said.
Representatives of the private sector and the Chamber said that the fact that the bank is seeing possibilities of the formation of capital market in the country is a good opportunity, and they recommended that it be accelerated in a short time.   
Discussions on the establishment of capital or stock market are not new. On several occasions the national bank has announced that it was undertaking the study for the formation of the market.
Individuals and companies today can only sell their share through bidding process or through brokers, due to the absence of such kind of alternative official market.
Experts who attend the discussion held on Tuesday October 8 said that there is no place for trading share and other capital investments in the country through the traditional way.
However the presenter and other experts have stressed that capacity building including skilled manpower is crucial before the formation of the capital market.  
Back in 2011, the late Prime Minister Meles Zenawi was quoted as saying “at the current stage, there is no need for a stock market in the country. Although the government is not against a stock exchange system in the country, its primary focus is on developing the banking system and developing the commodity exchange of agricultural products in rural areas.”
According to a study by Access Capital, Ethiopia is currently the only one in the world’s 15 most populous countries that does not have a stock market. Moreover the report suggested that ‘with domestic policy initiatives focused on other priorities, the probability of a stock market opening up in the next few years is very remote. This does not, however, mean that it is impossible to profit from Ethiopia’s strong growth momentum via stock market investments; in fact, there are plenty of indirect opportunities to do so.’
The report further states that at least 18 global companies that heavily invested in the Ethiopian economy and whose stocks are openly available for purchase in international stock markets have enjoyed double-digit annual returns over both a one-year and three-year time horizon. ‘Investors who bought their stocks three years ago would have seen an average annual stock return of 13 percent. Focusing on just the past year (2011), the average return for an investor who bought the 18 “Ethiopia-invested Global Stocks” was a particularly exceptional 44 percent’ gain the report further reveals.