The JSE reported a decline in annual revenue on Monday, and expenditure that continues to increase.
The owner and operator of Africa’s biggest and most liquid market for shares, bonds and derivatives, said that its expenses for the 12 months to December increased 14% to R1.54 billion (2018: R1.35 billion) off a low base, due to technology costs and recruited additional personnel, in a bid to become more competitive in the market.
Revenue decreased by 1% to R2.19 billion (2018: R2.20 billion).
In 2019 it reached an inflection point, by establishing a strong platform on which to grow the bourse through the multi-year Integrated Trading and Clearing initiative project for equity derivatives and currency markets.
“A number of new products were launched, including a tick-data-in-the-cloud solution; enhanced central order book trading functionality and monthly expiries in our derivatives markets,” the company said.
Decline in listings
The stock exchange was also hit by a decline in new equity market listings: from 12 in 2018 to five last year, causing a 5% decrease in listings revenue to R147 million.
Leila Fourie JSE CEO attributed this to a global contraction in listing, saying it’s “certainly something we are very much alive to and concerned about.
“It is very much part of an economic cycle: we saw the same cycle in 2008. So, in the downturn, there seems to be more of a hit in the small- and medium enterprises and where investors do not have an upper hand to invest in a less liquid stock. So we tend to see a lot of that stock de-listing. What we have seen in the last year is that the market cap for the JSE cap increased by 38%,” Fourie said.
Fourie said it has also noticed that there is a highly liquid market in SA because of the institutional bedrock of investors.
“Seventy per cent of the assets are contained in the country because of the exchange controls …. What we are doing about that is to partner with investment banks to identify the top stock in Mauritius, Africa and South-East Asia to try and attract inbound dual investing. We have a very strong value proposition in the value of our markets,” Fourie said.
Fourie said it managed to increase bond listings from 539 to 710 in the year.
“So, what we do as the JSE is to ensure that we have a number of products. Because we run bond markets and equity markets, commodities … when one market is typically down, you will find that one market is increasing. Like right now the equities market has dropped dramatically over the past year, but the bonds market is increasing by double digits.”
“So, we in SA are saved by the fact that the rest of the world is in a very low growth environment and you have a number of investors searching for yield. We are trading at just over 8% and Greece which is a sub-investment trade country is trading at close to zero. On a relative basis, the risk and return are a no-brainer and SA is a very attractive market for those who are seeking yield,” Fourie said.
Fourie said the stock exchange plans to expand into the rest of African markets.
“We haven’t seen any African listings; this is a new strategy and we are planning to roll out the strategies in the short term…so we are very excited to create new growth in the new short space”.