Background On The Stock Exchange Of Mauritius


02 Nov 2017

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Since the eighteenth century, Mauritius was well-known for the brokerage activities even though the island was still a French colony. The economic take-off in the early 1980’s has created a favorable environment for the development of a well-built financial sector. In this perspective, the Stock Exchange of Mauritius Ltd (SEM), a private limited company was established to operate and endorse an efficient, liquid fair and transparent securities market.

Since its beginning, the stock market has made a significant contribution to the deepening and the expansion of the financial sector in Mauritius. In its search to match the standard of services available on refined markets, the Stock Exchange of Mauritius has in recent years brought about significant improvements to the services that it offers namely, the move towards daily trading, the dissemination of daily market information and the setting up of the Central Depository and Settlement System.

Currently, the SEM operates three markets; the official market, the Development and Enterprise market (DEM) and the over-the-counter market. With the implementation of the DEM, OTC market will progressively be closed scheduling for January 2007.

Regulatory Framework

The SEM was recognized under the Stock Exchange Act 1988. Under the provision of this Act, the SEM has the exclusive rights to operate, handle and maintain the stock exchange in Mauritius. The SEM operates under the control and supervision of the Financial Services Commission, the stock market’s regulatory body and is managed by its board of Directors.


The main objectives of the SEM as stated by the Stock Exchange Act are:

To grant and maintain to the satisfaction of the commission adequate and properly equipped premises for the conduct of its business.

To operate and maintain the Stock Exchange

To offer facilities for buying, selling and dealing in securities in the Stock Exchange and

To set up a clearing service under the Securities (central depository, clearing and settlement ) Act 1996

The SEM also has the right to adopt rules governing the behavior of its members and listed companies and to insist on these rules.

Dessimination of Market Information

The SEM publishes vital market information and appropriate statistics to help its members and probable investors. Thus, the SEM has created two indices namely the SEMDEX and the SEM-7 and publishes daily information in respect of same to show the market movements and trends. The SEMDEX is an index of prices of all listed shares whereas the SEM-7 comprises of the seven largest suitable shares of the official list.

Likewise, the SEM publishes important stock market ratios such as the dividend yield ratio, price earnings ratio, volume of shares traded amongst others in respect of listed companies to help prospective investors to make better informed decision prior to investing in a particular company.

Limitations and Efficiency of the SEM

Even if there has been an increase in the number of individual investors on the market from around 6,000 in 1991 to over 40,000 at the end of 1998, the latter figure still represents about 7-8 % of the total population. In fact, although good corporate results, local investors tend to shift away from the market. Both the individual and institutional investors tend to adhere to their holdings. This therefore leads to too much upward pressure on prices under booming market conditions as well as lack of demand for undervalued stocks leadings to undue downward pressure on prices during bearish periods. Moreover, the Mauritian background tends towards depositing money in banks rather than investing in securities.

In addition, the market turnover ratio of the SEM for the past years is about 5% on average which means that there is low level of liquidity on the stock market. In such circumstances, low liquidity leads to high price volatility and renders entry and exit conditions difficult. Thus, the market becomes less information efficient.

As a result, the Mauritian market is far from the classic capital market. Certainly, the SEM, by virtue of the size of the economy and the limited business landscape, does not show the breadth and depth of sophisticated stocks markets. Besides, unlike developed countries where the stock markets are supposed to broadly replicate the economy, this is not the case in Mauritius. For example, none of the largest export-oriented and key GDP contributor garments manufacturers is listed on the official market. Furthermore, there is a reasonably high degree of market concentration thus reflecting the particular feature of the Mauritian business which is dominated by a few large companies and conglomerates.


There is a need of academic research at the domestic level and financial managers of Mauritian listed companies are currently looking ways to fund growth. An empirical analysis will help to know how capital structure theories work in small developing economy like Mauritius. Also, such a research study will also help to respond whether Mauritian financial manager should really worry about or adopt a specific strategy to deal with the suitable mix of debt and equity to finance their firm’s assets.

There is also a possibility to test whether the choice of debt/equity instruments are influenced by factors such as company size business risk, tax shield effects , growth opportunities, , liquidity position of firms and the composition of company’s asset.

The study will use data published in the Handbook of SEM for period starting 1999-2009 and consists of 15 companies listed on the Official market. This method represents a consistent source of information since the companies are subject to review and comply with accounting standards, laws and the listed rules of the SEM.

According to the listed rules, the SEM has the task of ensuring the operation of a market based on transparency and good governance. Therefore, listed companies have to observe a number of post listing requirements namely:

Notification of any possession of shares of another company

Submission of annual reports and accounts

Notification of any change in the Memorandum or articles of Association; any change in directorate and any decision to pay dividend; and

Notification of any proposed change in the capital structure, issues and redemption of securities.


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