Bank of New York Mellon Wants Zambian Companies to Liquify ADRs

Bank of New York Mellon Wants Zambian Companies to Liquify ADRs

From Mail & Guardian

Bank of New York Mellon (BNY) is selling American depositary receipts (ADRs) for three Zambian companies as US investors tap growth in Africa’s biggest copper producer.

The ADR programs established last month for Copperbelt Energy, Zambeef Products and Zambia National Commercial Bank are the first in southern Africa outside South Africa, according to New York-based BNY Mellon, the world’s biggest issuer of the receipts.

“Investors recognise the fact that Africa is really the last substantial continent to offer genuine frontier markets with very real growth prospects,” said Mary Gormley, the bank’s London-based managing director of depositary receipts for sub-Saharan Africa.

Southern Africa is the world’s fastest-growing region after developing Asia with the International Monetary Fund forecasting Zambia’s economy to expand 6% this year. While the ADRs raise the profile of local companies, with BNY Mellon reporting interest from emerging-market funds, the securities risk draining liquidity from the stock market in the Zambian capital, Lusaka, said Caesar Siwale, chief executive officer of Pangea Securities in the city.

“It’s a very positive thing for Zambia and it’s an affirmation of the good fundamentals,” Siwale said yesterday in an interview from Lusaka. “But, it will probably end up making the liquidity situation on the local market worse.”

Unsponsored ADRs

Because the three ADRs are unsponsored, which means the programmes aren’t backed by the companies, they will tie up blocks of shares that can no longer be traded in Lusaka, said Charles Mate, managing director of Stockbrokers Zambia. It would be better if the companies established sponsored ADRs, involving the sale of new shares to US investors, he said.

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