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The decoupling of the Johannesburg Stock Exchange

Article - March 30, 2015

African equity markets overall made a poor showing last year and have remained weak in the opening months of 2015. The continued stellar performance by the Johannesburg Stock Exchange places it in a class apart from the rest


In 2014, a sampling of eight African stock markets by Morgan Stanley Capital International (MSCI) revealed they had lost 14.5% of their value during the year.

However, the data left out the continent’s largest exchange by market capitalization, the Johannesburg Stock Exchange (JSE), whose All Share Index ended the year with an 8% increase.

Market performance at the JSE in the first two months of 2015 has confirmed South Africa’s market rally. The JSE’s All Share Index was up by 3.01% in January and by 3.94% in Feb-ruary, posting a new year-on-year increase of 12.15%. The All Share Index represents 99% of all equities listed on the JSE’s Main Board, a total of 160 companies as of December 2014.

Despite labor unrest and elections-driven uncertainty dur-ing 2014, the sale of shares by JSE-listed companies and initial public offerings (IPOs) were up 58%, netting $US 13 billion for issuers. The bourse’s currency, bond and derivatives markets are among the top 20 worldwide.

“Today, the JSE is one of the most liquid, developed and ef-ficient markets on the African continent. It is the sixth largest among emerging economies,” says Bert Chanetsa of the Finan-cial Services Board (FSB), the market regulator.

For 2015, JSE authorities insist that sales of shares will keep up with the exchange’s nine-year high. The momentum is easy to understand, given JSE’s role as a capital-raising platform for the entire continent. After all, the South African bourse has a reputation for depth, liquidity and global connections.

With 23 new companies floated on the exchange in 2014, eight of which were property businesses, the JSE has also been quick to adapt to market trends. Its Listed Property Index managed to grow 22% last year, outpacing the All Share Index by 13.5%.

The JSE’s performance contrasted sharply with others in Sub-Saharan Africa. The Nigerian Stock Exchange (NSE) ended the year with a 33% decrease in its All Share Index, another ca-sualty of the oil price debacle. This, coupled with a revision in budgetary spending plans was largely behind the downturn at Africa’s largest petroleum exporter.

For 2015, the JSE and NSE have announced a new partner-ship that will open trading floors to mutual issuers and investors. Cross-border listings have become popular in Africa because of the impact on market liquidity. In addition, the opportunities for higher returns are spread across an entire continent.

According to JSE’s Director of Capital Markets, Donna Oost-huyse, this lack of connection between stock markets has been a challenge. The joint partnership will soon allow South African companies to list at the Nigerian Stock Exchange and vice versa.

“Nigeria faces almost the same challenges we face in South Africa, which is how to transfer the expertise in educating the issuers and investors in terms of what value the exchange brings to the economy,” Oosthuyse told Asoko News in January.

Currency stability and industry trends can put selling pres-sure on share prices, often leading to sharp fluctuations in Afri-can markets. Fears of depreciation usually result in an outflow from equities by foreigners.

At the Ghana Stock Exchange (GSE), market activity was hindered by the plunge in the value of the Ghanaian cedi. As the currency lost value, the GSE’s Composite Index fell from a high of 2,438 points on February 20 to 2,286 points in late December, a decrease of 6.2%.

By Paul de Zardain