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Quick! Which African index is up nearly six percent over the past two weeks? Don't be too hard on yourself if the answer doesn't immediately jump to mind. Most investors are oblivious to not only this index, but the market it represents, too.

The Alt-X is an exchange comprised of small, high-growth South African companies. These companies must abide by most of the rules and regulations of the Johannesburg Stock Exchange (JSE), but they are exempt from some of the more stringent requirements that would be difficult for small companies to comply with. For instance, the Alt-X does not require any profit history prior to listing and requires only R2 million (US$280,000) worth of share capital.

Many companies list on the Alt-X with the intention of eventually graduating to the JSE. It is a bit like the JSE's minor leagues. In fact, the exchange even requires listed companies' executives to attend a training and induction program at the prestigious Witwatersrand University.

At this time, 20 companies trade on the exchange. They represent industries ranging from restaurant chains to mining. Alt-X also hopes to attract technology entrepreneurs in need of additional capital.

So, does it merit closer investigation by overseas investors? Well, 14 companies have joined the exchange in the past two years, and the market hasn't treated them very kindly. All but one of them has declined in value since listing. Reminiscent of the sky-high valuations given Internet IPOs in this country a few years ago, Alt-X debutantes typically burst on the scene with overly optimistic share prices.

Some of the more established listings, however, might be worth a closer look. African Dawn Capital (ADC) underwrites unsecured home improvement loans to employed individuals that earn between $300 and $1000 per month. The company grew earnings by 80% last year, but it still trades at a historical P/E of just 9.47.

Similarly, ISA Holdings Ltd (ISA), an information security specialist, boasted a 53% profit increase this year, but is valued at just over seven times earnings.

Is your curiosity piqued? Read all about the Alt-X at
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