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Trading volumes dwindle as policy risks mount

The average daily volume of shares traded on the JSE in the past month fell to 247 million on Wednesday.

Trading volumes on Africa’s biggest stock exchange have dwindled amid uncertainty about the ruling party’s policies on land and mining ahead of elections set for next year.

The average daily volume of shares traded on the Johannesburg Stock Exchange in the past month fell to 247 million on Wednesday, from as high as 408 million in January, according to data compiled by Bloomberg. On Monday, only 151 million shares changed hands, the lowest number since January 2, when South Africa was in the midst of annual summer holidays.

Source: Bloomberg

While the drop-off may be ascribed partly to global factors including the trade war between China and the US and the withdrawal of monetary stimulus by developed-nation central banks, local political developments are also to blame, according to exchange operator JSE. The euphoria that greeted Cyril Ramaphosa’s election as leader of the African National Congress in December, which elevated trading volumes in the first quarter, has dissipated, while uncertainty around land reform and mining ownership are rattling investors.

Read: Four concerns foe JSE investors 

“There is careful scrutiny around the country around our policy discussions and uncertainty as we go into elections next year,” Donna Nemmer, director of capital markets at the JSE, said in an emailed response to questions. “Investors are taking a wait-and-see approach.”

Trading volumes fell in June and July and are on track for a decline in August, a month in which trading has picked up in four of the past six years, according to data compiled by Bloomberg. A decline in August would represent the first time in two years that trading volumes fell in three consecutive months.

Land seizures

The rand sank last week after Ramaphosa said the ANC wants to amend the constitution to allow land seizures without compensation as it seeks to maintain its majority in next year’s election. He reiterated comments that reforms won’t harm the economy, agricultural production or food security.

But the issue is stoking concerns in the nation of about 56 million where wealth and poverty are largely divided along racial lines. Nedbank  said this week it expects home loan growth to slow as the debate deters investment.

There’s also little clarity about new rules to govern ownership of mines and mineral rights. South Africa risks driving away new investment and crippling its mining sector if “reckless” new rules are implemented, AngloGold Ashanti Chairman Sipho Pityana said last month as negotiations between mining companies and the government dragged on.

The FTSE/JSE Africa All Share Index gained 0.4% by 11:21 am in Johannesburg, paring its decline this year to 2.6%. 

© 2018 Bloomberg

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Trading volume looks about normal when looking at that moving average line and ignoring the abnormal peak in December 2017. Seems to me somebody wants to score political points with dubious graphs and causality arguments.

Why would any sane investor invest in a country with a vague property ownership policy as well as low growth, high unemployment and crime, broke SOEs etc. %m taxpayers and 17m basic free money. Mining and manufacturing are going backwards, unions get above inflation increases, and the ANC leadership is in chaos with the various criminal factions within it. Local banks and insurers look like good value but there is talk of writing off small loans and EWC is not helpful. MTN, Steinhoff etc. stink to high heaven and retail is dying with the over-stressed daily poorer consumer having less and less consumable cash-look at woolworths share price-halved. Naspers discount to Tencent is huge due to a corrupt holding structure, Richemont, Ambev, Anglo, Biliton you can buy offshore and Sasol is not shooting out the lights.

If a global investor wants EM exposure there are many better places on a risk/reward basis.

Whether trades dwindle or not….

Give us the land

I’m not saying I know the answer but in an environment of uncertainty around property rights and unions asking for the nationalising of mines it is hard for trading volumes to be pumping.

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