Volatility boosts JSE first half year results

After a strong first half performance, the JSE Limited (www.jse.co.za), which operates the Johannesburg Stock Exchange, is making 2010 a year of consolidation. Africa’s biggest exchange reported a 14.5% increase in revenue but managed to control its operating costs, leading to increased net profit after tax of R207.6 million (US$28.4 mln) up 13.1% on H1 in 2009, when it was R183.5 mln.
The press release quotes Russell Loubser, CEO of the JSE: “These results come at a time of increased competition in the global exchange industry, the growing success of alternative trading venues and increased regulation of both exchanges and the trading of financial products to try to reduce the chance of another financial fallout on the same scale as the global financial crisis.”
Plans for the coming year include increasing liquidity and competitiveness:
• Introducing a strategy to grow the exchange traded interest spot and derivative market, in consultation with market participants and industry groups. Earlier the JSE acquired the Bond Exchange of South Africa.
• The Africa strategy seeks JSE still seeking new listings for its Africa Board, which encourages African companies domiciled outside South Africa to take a secondary listing. The second Africa Board listing was Wilderness Safaris in April 2010.
• The exchange is replacing its back office technology, and is in test phase with all “satisfactory”.
• It aims to encourage on-exchange central order book trading in the equity derivatives market and will provide services to bring clients who previously traded off-exchange to trade on the JSE to manage their risk.
• Additional hard commodity instruments – silver and copper derivatives – were launched under licence from the CME Group in August 2010.
With regard to the results, the JSE has experienced more volatility, like other global markets, and this has meant more trading and boosted JSE Ltd. Group revenue to R623.3 mln ($85.3 mln), up 14.5% from R544.5 mln in H1 2009. This is mostly increased trade on the spot equities market. Foreigners were again net investors, investing R19.1 billion ($2.6 bln) in South African equities and R36.2bn in local bonds. Liquidity on the equities market rose to 53% for the period (H1 2009: 48.8%). Investors are slightly less hesitant about equity derivatives and commodity derivatives recovered, with revenue rising 15.9% to R20.6 mln (H1 2009: R17.8 mln).
The JSE is predominantly a fixed cost business, and its main expenses are technology and people. Expenses rose 13.3% to R393.2 mln (H1 2009: R347.0 mln) largely due to increased headcount as a result of the BESA acquisition as well as additional IT personnel.

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