The JSE has seen the largest year-to-date foreign inflows to the bond market since before 2020 with investors regaining interest in SA since the election.
While net outflows continued on the equity market, JSE CEO Leila Fourie said sentiment was at an inflection point, with foreign investors contemplating shifting to an overweight stance on SA after being underweight relative to emerging markets index for three to six years.
Fourie spoke on Wednesday after the JSE posted zero growth in profit after tax (R492m — for the six months to end-June. The results reflect how dependent the company still is on equity-market-related revenue, which fell 12%.
That was offset by strong revenue growth from other trading and nontrading activities as the JSE pursues a diversification strategy that saw its nontrading income rise to 39% of the total from 29% five years ago.
Only 282 companies are listed on the JSE’s equities market, which is still Africa’s largest. But four new companies listed in the year to date and the pace of delistings slowed to 12 from almost double that last year.
Fourie said there was a surge in secondary capital raising. Listed companies raised R78bn on the market this year against R4bn last year.
Bond issuance also increased. An improvement in foreign investor sentiment on SA was evident in Monday’s surge in volatility on global markets: the MSCI emerging markets index fell 4.22% but the JSE all share index was down just 1.19%, said Fourie.
The JSE all share returned 3.3% so far this year, outperforming the 2.3% return on the MSCI emerging markets index. The rally that began after the government of national unity was announced has continued.
Fourie said investors “are reviewing SA for more sustained delivery and showing a resumed interest in the possibility of investing into SA. Most of the SA-listed entities are deeply underweight relative to valuations in other emerging markets and investors are starting to see potential.”
JSE revenue rose 4.3% to R1.47bn for the six months and total income 3.3% with expenses up 6.4%, earnings before interest and tax down 2.1%.
No dividend was declared — Fourie said it wasn’t common practice to pay a dividend at the interim stage.
Trading income was flat year on year at R943m, but nontrading income rose 12% to R593m.
The JSE’s strategy of diversification has helped it to deliver an 88% increase in nontrading income since the first half of 2019, Fourie said.
The decline in equity-related revenue was offset by increases in areas such as currency derivatives (9.8%), bonds (7.8%), co-location fees (17%) and commodity derivatives (25%).
JSE Investor Services increased revenue by 29%, thanks to a market services acquisition the company made three years ago, which has delivered “very material returns”, Fourie said.
Partnership
The JSE has also partnered with Amazon Web Services to transform its internal back office system and reduce costs.
“I feel pleased with the progress that we’ve made in structurally improving our operating performance and our diversification of revenue. And that’s really just through innovation and partnership,” Fourie said.
The JSE has this year seen the new listings of PowerFleet, WeBuyCars, Cilo Cybin and Rainbow Chicken. Fourie is cautiously optimistic about an improvement in the number of listed companies, buoyed by overall market sentiment, not only in SA but also globally.
Canal+ is unbundling from Vivendi and is looking to a primary listing in London and a secondary listing on the JSE. Coca-Cola SA has plans to list on the JSE but has been waiting for market sentiment to improve. Over the longer term companies such as African Bank and TymeBank have signalled their intent to list, Fourie said.
The JSE is busy with a project launched in September to simplify its listing requirements to make them easier to understand and comply with, and expects to complete the process within the next month.
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