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Investing in Shares

People can invest by buying shares in companies listed on exchanges. Those shares are known as the company’s stock and may become more valuable if the company performs well over time. In case this happens, other investors may be willing to buy them for more than was paid, enabling initial investors to earn a profit.

How to invest in shares

Investing in the Securities Exchanges in 5 steps

Verify whether the security exchange is licensed.
Choose a licensed investment dealer: Investment Dealers are the authorised intermediaries to trade securities on the Stock Exchange of Mauritius (SEM). When choosing an Investment Dealer to invest on the SEM, it is essential to choose the one that can better adapt to the investor’s situation.
Open a Trading Account with the Investment Dealer: The investor should be of legal age (over 18 years old or through a legal guardian) and have a residence in Mauritius. The Investment Dealer will transact on the investor’s behalf on the Securities Exchange. The investment dealer will need to open an account with the Clearing and Settlement Facility.
Choose the asset in which to invest: The investor has to decide in which capital market instruments to invest, such as shares or bonds.
Submission of orders: The investor will submit his trade orders to the Investment Dealer through phone, email, face-to-face as well as the type of orders.
Matching of orders: To note that for an investor to buy or sell shares, there should be a demand and supply for same.

As a shareholder of the company, you may be entitled to the following:

○ Dividends (share of profits)
○ Additional shares (Rights issue, Bonus issue)
○ Capital gains or losses (on purchase and sale of shares)

Helpful Tips

Handle the basics first, for e.g. budgeting, savings.
Investment is only possible if you have savings.
Know your goals and timeline. E.g. The amount you invest, how long you want to have your money invested.
Seek professional advice where required.
Read and understand the prospectus.
Doing your due diligence is essential.
Higher volatility is the price you pay for higher returns.
Build a diverse portfolio.
Be aware of the risk factor.
An investor should choose an Investment Dealer according to her/his needs, who will transact on her/his behalf on the Securities Exchange. S/he will need to open an account with the Central Depository and Settlement System (CDS), which provides centralised depository, clearing and settlement services for the Mauritian equity and debt markets. The investor will have to settle her/his trades and enter a contract with the investment dealer and pay the appropriate fees. There are different categories of investment dealers which are licensed by the Financial Services Commission (FSC).
Become familiar with securities exchange related terms – dividends, additional shares, capital gains or loss, shareholders.
One cannot become wealthy overnight, investing requires patience and discipline from investors.
Follow up regularly on your investment

Question and Answers

How to invest in Securities Exchanges in Mauritius?

A Securities Exchange is a platform where Investment Dealers (previously known as stockbrokers) buy and sell securities on behalf of the public, i.e. investors. However, any member of the public cannot go on a Securities Exchange directly to buy or sell Securities (e.g shares, debentures, bonds etc).

What are shares / Stock / Equities?

Buying shares in a company may give you partial ownership of that company so that you become entitled to certain benefits.

Firstly, you may be entitled to payment of dividends, which is a sum of money paid by a company to its shareholders out of its profits.

You may also be entitled to the issue of additional shares instead of a dividend, in proportion to the shares you already hold (bonus).

Another benefit is rights issue which is an issue of shares offered at a special price by the company to existing shareholders in proportion to the number of shares already held.

You are also entitled to participate in Annual General Meetings and exercise voting rights.

The share price can increase or decrease based on the performance of the company.

How to keep track of your shares?

If you choose to invest in the shares of a listed company, it is important to keep track of the company’s performance on the Market. This is because you need to know whether you should keep the shares, sell them or buy new shares.

A company’s share price changes with each new piece of information released to the market. Staying up to date allows you to act quickly and take advantage of opportunities or get out of a potentially bad situation. You can check the share price on a daily basis.

What are your rights and obligations as a shareholder?

Shareholders of companies have certain rights and obligations. Firstly, they have the right to transfer ownership, that is, they are allowed to trade their stock on an exchange.

Depending on types of shares, shareholders also have voting power on major issues linked to the company, for example, when electing directors and in case of mergers or liquidation. Voting usually takes place at the company’s Annual General Meeting.

Shareholders also have a right to consult the accounts of a company. This opportunity is provided through a company’s public filings, including its Audited Financial Statements and Annual Report.

Directors owe a fiduciary duty to shareholders and are accountable to them.