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Fractionalized Securities as a Catalyst for Democratization of the Capital Market in Angola

Heriwalter Domingos


The year 2023 certainly constitutes a milestone in terms of the capital market in Angola, with challenges in several dimensions. When we analyze the binomial between market results and the new operating model of the Securities Market, the significant idea of the golden year of the capital market in Angola becomes evident.


In the spectrum of the capital market, the existence of a transparent and functional stock exchange contributes to its position as the highest point of a market economy, that is, the greatest thermometer to measure the level of robustness. of a given financial system and respectively of a country's economy is the stock exchange.

Without prejudice to the genesis of the capital market in Angola, being associated with the 10th of September 1997 with the Creation of the Capital Market and Stock Exchange Center, there are three lines of approaches regarding the effective functioning of the capital market in Angola.

Being the first line of approach that considers the effective functioning of the capital market with the appointment of the first Board of Directors of the Capital Market Commission 2012, having fundamentally resulted in the creation of a regulatory component and respective promotion, serving as a foundation for the good market functioning.

The second line of approach considers the effective functioning of the capital market in Angola, with the creation of BODIVA in 2014, which effectively allowed the execution of businesses in a multilateral environment in the different segments of the Stock Market. Finally, despite the growth of the capital market during the aforementioned period, there is a third line of approach that only considers the effective functioning of the market with the respective listing of companies on the Stock Exchange, through the admission to trading of BAI and BCGA Bank shares. IN 2022, thus allowing Angola to enter the range of countries that have companies listed on the stock exchange.

Regarding the year 2023, despite representing around 600.14% in relation to the same period last year, with BODIVA in that period negotiating, around KZ 7.67 billion and the respective increase in the history of issuers to nine (9) by the end of 2023, as well as the registration of 10 new BODIVA Members (Brokers and Distributors), one of the highest points in that period was the launch of the Fractional Securities Market, which will certainly serve as a catalyst for the democratization of the capital market in Angola.

In this context, Fractional Securities are securities resulting from the division of the quantities of an original security admitted to trading on the BODIVA markets. That is, when dividing the security, a given applicant will be dividing the original security, and the same division may result in the nominal value in the manner desired. For example, for Non-Readjustable Treasury Bonds, whose nominal value is KZ 100,000.00 (one hundred thousand kwanzas), if a given applicant (individual or legal entity) decides to divide their portfolio into 10 installments, this means that the nominal value fractional is KZ 10,000.00 (Ten thousand Kwanzas), this is the reference price of the said instrument, in this case it represents only 10% of the reference price (nominal value) of the original security, ensuring greater ease of acquisition for small savers.

Therefore, as the Fractional Securities Market is a segment of the Organized Over-the-Counter market, it means that the only way to acquire the aforementioned instruments will be through a prior agreement between sellers and buyers. Notwithstanding, the fact that it is exclusively associated with the Organized Over-the-Counter (Bilateral) market, the market results indicate that operations in a bilateral environment in the last three years represented on average around 21.01% of the amount transacted, while the multilateral environment It ended up representing on average around 78.99% of the amount transacted, making it an interesting challenge in terms of structuring the fractional securities market into a multilateral component, thus eliminating the need for a prior agreement for operations of this nature.

Along this path, the prelude to the Fractional Securities Market took place on September 21, 2023, with the fractionation of 5,933,000 (five thousand, nine hundred and thirty-three) bonds required by Banco YETU, S.A, with a nominal value of Kz 100.00 (One Hundred Kwanzas), that is, the nominal value being the main indicator of the reference price of a given security, with the respective fractionation of the obligations required by Banco YETU, S.A, in a very simple way ends up dropping the idea of the capital market as elitist and with a low value within the reach of all Angolans, they will be able to propaedeutically acquire securities.

In fact, despite the potential of the Fractional Securities Market, as a catalyst for the democratization of the capital market in Angola, there is an urgent need to simplify the functioning of that market and, for due purposes, it is essential to pay close attention to the following elements: (i) . Operation of the Fractional Securities Market; (ii). Democratization of the Capital Market.

I. Functioning of the Fractional Securities Market (MVMF): For the functioning of any market, the existence of an objective and pragmatic regulatory framework is essential and in the case of the MVMF as a segment of the Organized OTC market, it ends up having all the guidelines for operations listed in BODIVA Rule No. 1/23 – Fractional Securities Market.

II. Democratization of the Capital Market: Indeed, when the fractionalized securities market is affirmed as a catalyst for the capital market in Angola, it is essential to observe the average growth of the investor base in the Central de Valores Mobiliários de Angola ("CEVAMA"), having reached by the end of 2023 around 19,200 investors, demonstrating that there is room for deeper work in terms of financial literacy and the creation of market accessibility mechanisms.

On the other hand, it becomes increasingly interesting to understand the potential of the fractionalized securities market, as a catalyst for the democratization of the capital market in Angola, in the investor preference component, as identified below, and it is actually evident that people Individuals end up having a greater appetite for acquiring new instruments available on the market.

Investor Preference Companies Individuals
SONANGOL (Bonds) 5.11% 94.89%
BAI (Shares) 95.00% 5.00%
BGCA (Shares) 22.46% 77.54%
Treasury Bonds 52.35% 47.65%





Source: Regulated Market Special Session Report (BODIVA)

Finally, it can be said that the year 2024 competes to be the prelude to the democratization of the capital market in Angola, allowing investment access to all pockets, thus winning the market, thus winning the country.Her

Opinion of
Heriwalter Domingos

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