Nascent Stock Exchanges
The Nascent stock exchange offers a wide variety of trading options to investors. The exchange offers an overview page where you can see key statistics about a stock, including market capitalization and earnings per share. The overview page is also linked to more information. You can also find the company’s financial statements.
The key to the success of a nascent stock exchange is scale. It must have a high number of listed firms and adequate liquidity. It must also have a large national savings rate to attract investors. In addition, it must have a strong banking system to support trading. A well-established banking sector is essential to opening a nascent stock exchange.
There are some notable successes among nascent stock exchanges. Botswana’s telecoms company, for example, sold its stock this year, marking the largest new offering in the country. Another successful venture in the region is the Bourse Regionale des Valeurs Mobilières (BRVM), which has brought together 8 national markets in Africa, creating more listings and more investors.
The Nairobi Securities Exchange is one of the most successful nascent exchanges. Its market capital is estimated to be around 8% of the country’s GDP. However, it has a relatively small turnover and very low trading activity. The exchange is advancing towards electronic clearing and settlement technologies.
Many African exchanges are small and do not have a strong market capitalization. A majority of African exchanges have problems attracting new issues. In addition, liquidity is a bigger challenge – few of them manage to achieve a turnover of 10 per cent of their market capitalization. A number of nascent stock exchanges have failed to reach this goal.
The National Stock Exchanges Authority and NSE should increase their liquidity in the derivatives and spot markets. Institutional investors should be able to participate in the market. This will increase the liquidity and make it more competitive for all investors. This will boost growth and the reputation of these exchanges. The nascent exchanges are increasingly important and will have a longer-term impact if they continue to expand.
Despite the benefits of these exchanges, there are some risks. The primary risk is that earnings management can adversely impact the post-listing performance of a stock. Therefore, it is crucial for SEBI to find cost-effective ways to control earnings management. If not, earnings management could have dire consequences for SME exchanges in India.