Archive for the 'South Africa' Category
August 29th, 2010 by Tom Minney
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.
August 29th, 2010 by Tom Minney
For full details, the interim results for the first half year to June 2010 are published on the JSE website. A recent JSE press release summarizes the Group’s revenue for the period as coming from the following:
• Listings – 6 new company listings occurred during first half of 2010 – 5 on the main board (including Wilderness Safaris on the Africa Board) and 1 on AltX – compared with 4 in H1 2009. Revenue in the JSE’s Issuer Services division, which handles new listings, increased 17.5% (H1 2010: R45.8 mln, up from H1 2009: R39.0 mln).
• Spot Equities market – The number of spot equities market transactions rose 22.4% (H1 2010:12.2 mln transactions, up from 10.0 mln in H1 2009), generating revenue of R164.8 mln (up 13.5% on H1 2009: R145.3 mln). Marketing initiatives include: i) A new billing model introduced in March 2010 to reduce total trading costs, encourage high-frequency trading and reward high-volume participants. Trade volumes have increased since. ii) The exchange added an anonymous trading facility which allows for the execution of large trades through hidden order functionality in the central order book. iii) The JSE continued to pursue its strategy of increasing the financial knowledge of South Africans in order to increase the number of retail investors and add to trade volumes. iv) New product innovation continued, including a new range of commodity warrants and collective investment products including exchange traded funds.
• Equity derivatives market – contracts traded rose by 6% to 84.2 mln (H1 2009: 79.4 mln), with the biggest increases from international derivatives, and value traded rose 26.2%. However revenues fell slightly by 0.7% to R53.3 mln (H1 2009: R53.7 mln) mainly owing to two shifts in the product mix: i) a move from options to futures and ii) a drop in the value of Can Do derivatives traded during H1 2010 compared with the previous period. The JSE adopted a “maker-taker model” for its equity derivative market effective 6 July 2010 to bring greater liquidity and encourage greater activity and transparency and says it is noticing increased use of the upgraded derivatives engine following the introduction of the new pricing.
• Commodity market – derivatives contracts traded increased by 12.1% (H1 2010: 1.01 miln, up from 902,370 in H1 2009). Commodity options accounted for most of this growth, owing to volatility in agricultural prices at the start of 2010. This shift in product mix impacted favourably on revenues which rose 15.7% to R20.6 mln (H1 2009: R17.8 mln) during the period.
• The Interest Rate market generated trade reporting revenue of R16.4 mln. Reported cash volumes in H1 2010 climbed to R7.33 trillion (H1 2009: R6.88 trillion).
• Revenue generated by the Information Products Sales division, which is focusing on new and existing offshore clients in a tough market following the downsizing of several global institutions, climbed 6.5% to R58.7 mln (H1 2009: R55.1 mln). Marketing efforts are currently focused on the FTSE/JSE Equally-Weighted Top40 Index, launched during the period. There was a fall in the number of live terminals issued to corporate clients in 2009, but this has now stabilised.
The following table is compiled by AfricanCapitalMarketsNews.com
.
R million % of total
Issuer services (listings) 45.8
Equities (spot) trading 164.8
Equity division total 394.7 63.3%
Equity derivatives 58.3 9.4%
Commodity market derivatives 20.6 3.3%
Interest rate 16.4 2.6%
Information Products Sales 58.7 9.4%
Other 74.6 12.0%
Total 623.3
Equity division includes equity trading fees, risk management, clearing and settlement, membership, issuer services and technology (BDA).
June 23rd, 2010 by Tom Minney
South Africa’s full service securities exchange, the JSE Ltd (www.jse.co.za), on 17 May recorded 205,748 trades valued at more than R20 billion (US$2.6 billion). This coincided with the JSE’s equity futures “close out” when trades in derivatives called futures contracts had to be settled.
It is the first time in its 123-year history that more than 200,000 trades have been done in a day. On 7 May 2010 the previous record number of trades was 189,253.
According to a press release, Leanne Parsons, Head of Equities Trading at the JSE, explained: “This increased activity occurred on yesterday’s futures close-out as traders closed out their derivatives positions and purchased the underlying shares.”
Close-outs happen 4 times a year in March, June, September and December and usually bring a spike in trading activity.
A general rise in average daily trade numbers in 2010 also contributed to the record. According to the latest JSE monthly trading statistics published for May 2010, the number of equity trades is up by 24% year-on-year, from a total of 8.2 million trades in the first 5 months of 2009 to 10.1 million in the same period of 2010. There has been an average of 99,128 trades each day in the first 5 months of 2010, compared to average daily trade numbers of 46,216 (in 2007), 69,295 (2008) and 84,018 (in 2009).
On the JSE’s equity derivatives market, volumes of futures contracts traded rose nearly 7% during the first five months of 2010 on the previous period (2010: 51.3 million; 2009: 48.1 million). The number of futures contracts traded in May alone was 6.8 million. Allan Thomson, Head of Derivatives Trading, said in a press release: “This year-on-year growth is pleasing.” Trade in index futures increased 101% year-on-year off a low base.
The number of commodity futures contracts traded on the JSE’s commodity derivatives market increased by more than 8% in the first five months of 2010, compared with the same period in 2009 (2010: 662,000; 2009: 610,000). In the same period, volumes traded in commodity options have grown 27% year-on-year.
In the JSE’s interest rate market, cash bond volumes remain stable with volumes reported to the exchange in the month of May slightly below R1.4 trillion compared to R1.1 trillion in April. Year-to-date volumes also remain in the same range as 2009 with the 2010 reported trade number at R5.85 trillion compared to R5.83 trillion in 2009.
“Given the stable interest rate outlook and the continued issuance by National Treasury and state-owned enterprises there is no reason to anticipate any major market volatility with regard to price or volume movements. June and July will present some volume pressure due to the soccer world cup; however volumes should return to normal after the event,” commented Graham Smale, Director: Interest Rate Products.
Positive growth continues in the market for listed interest rate derivatives. Contracts traded during the 3 months ended May grew nearly 45% year-on-year, off a low base. “We will continue to focus on building a successful exchange-traded interest rate derivatives market,” added Smale.
The JSE connects buyers and sellers in 4 different financial markets: equities, equity derivatives, commodities derivatives and interest rate instruments. The JSE Ltd says it offers the investor a first-world trading environment, with world-class technology, surveillance and settlement in an emerging market context. It is amongst the world’s top 20 largest equities exchanges in terms of market capitalisation.
The JSE’s equity market has been particularly volatile recently in line with turbulent global markets. This volatility is represented in numeric form by the JSE’s South African Volatility Index (SAVI) which rose from a low of 18% in April to a high of 33% in May before subsiding to 26% by close of trade yesterday.
The JSE’s introduced a new billing model on 1 March 2010, which aims to incentivise increased trade and to recognise retail and algorithmic investors, both important target markets for the JSE.
Trading statistics for the 17/06/10
Volume 394,839,938
Value R20,839, 256K
Number of trades 205,748
Trading statistics for previous record number of trades 7/05/2010
Volume 1,018,433,885
Value R30,613,372K
Number of trades 189,253
June 18th, 2010 by Tom Minney
South Africa’s first, specialised, private equity clean technology fund, Evolution One Fund, has reached its final closing after raising R700 million (US$92 million) from local and foreign investors, including development finance institutions, a family office and sovereign wealth funds. This capital is to be invested into equity in clean technology projects and enterprises including new energy and environment focused technologies in South Africa and across the Southern African Development Community. Evolution One will concentrate on long-term equity and equity-related investment based on active management and adding value after investing.
The fund will prioritise investments in expansion capital but will consider earlier-stage environmental infrastructure projects when there is clear evidence of early revenue streams and profitability. The fund will also invest into proven technology or projects that clearly demonstrate market adoption. The minimum investment size is R10 million ($1.3 million) and its maximum investment is R100 million into any one project or technology.
Consensus Business Group (www.consensusbusiness.com), the London-based advisor to The Tchenguiz Family Trust, has played a leading role in establishing and advising the fund. Consensus owns or manages 300,000 UK residential units and £4 billion of commercial properties, as well as extensive “clean tech” investments. As founding cornerstone investor, Consensus has secured the participation of 7 other leading international organisations.
Vincent Tchenguiz, Chairman of Consensus said: “We have extensive experience and a long track record in global clean technology investing and this has given our partners the confidence to join with us in setting up Evolution One in South Africa. We are delighted to have successfully achieved final closing of this ground-breaking fund.
“Evolution One Fund is the first dedicated clean technology private equity fund to be established for Africa and its value proposition is to bring Consensus’s active financial modelling and specialist insights together with expertise to projects and technology enterprises in South Africa and the SADC region. In addition, the investment capital of this network of leading investment institutions inherently leverages access to specialised knowledge and skills in the broader global clean technology sector.
“The Fund is advised by a fund management team comprising 9 principals and analysts who collectively bring their unique breadth and depth of commercial, financial and sustainability credentials. This is combined with strong black empowerment credentials and the ability to structure broad-based black economic empowerment transactions.”
Consensus is joined in the Evolution One partnership by IFC, a member of the World Bank Group; the Finnish Fund for Industrial Cooperation (Finnfund); the Swiss Investment Fund for Emerging Markets (SIFEM); fund of funds the Global Energy Efficiency and Renewable Energy Fund (GEEREF- www.eif.org), a compartment of the European Investment Fund; the African Development Bank (AfDB); the Norwegian Investment Fund for Developing Countries (Norfund); and the Industrial Development Corporation of South Africa (IDC).
The local South African fund advisor is Inspired Evolution Investment Management (IEIM – www.inspiredevolution.co.za), which aims to support and guide target invested companies and provide long-term capital growth. The Evolution One fund is a 10-year fund is committed to investing into clean technologies in the new energy and environmental sectors, including cleaner energy generation such as wind and solar energy, and energy efficiency, cleaner production and more efficient manufacturing processes, air quality and emissions control, water quality and resource management, waste management, agribusiness, natural products and materials and related services for sustainable buildings.
Michael Brooks, CEO of IEIM, says the fund management team has already appraised numerous deal opportunities and within weeks would announce details of the first 3 investments to be undertaken by the fund: “In the past 2 years we have seen significant positive shifts in the commercial thinking underpinning the roll out of clean technology projects and enterprises, both within the public and private sectors.
“The South African government’s recent adoption and implementation of the Renewable Energy Feed-in Tariffs and Co-Generation Feed-in Tariffs are evidence of the state’s support for regulatory drivers to underpin the development at scale of commercially viable renewable energy projects here and in our neighbouring countries. We are currently actively engaging with a range of promoters of clean technology enterprises and with developers of renewable energy projects.”
The first close of the fund was announced in July 2008 when $54 million had been raised from the initial 4 investors: IFC, Castleway Properties (owned by Tchenguiz Family Trust), SIFEM and FinnFund.
June 14th, 2010 by Tom Minney
Adlevo Capital Managers (www.adlevocapital.com) announced on 10 June that it has completed the first closing of Adlevo Capital Africa LLC fund with capital commitments of US$52 million. The fund will make expansion capital investments into companies with technology-enabled business models across sub-Saharan Africa.
The fund has received capital commitments from development finance institutions and private institutional investors based in Europe, South Africa and the US. Adlevo Capital plans to hold additional closings for the fund over the next nine months with a final closing in the first quarter of 2011.
Yemi Lalude, founder and Managing Partner of Adlevo Capital, says in a press release: “We are very pleased to have attracted investments from several of the most successful Africa fund investors who, like us, see the growing scope for compelling technology-enabled company investments and believe that investments in this area will also provide positive social development outcomes. The Adlevo Capital team has developed a pipeline of attractive investment opportunities and is looking forward to commencing investments and working with the management teams of its portfolio companies.”
Adlevo Capital, a Mauritius-based fund manager, is the first private equity firm focused on investments into technology-enabled companies across multiple African countries. It aims to capitalize on growing investment opportunities in the technology-enabled service segments of multiple industry sectors in sub-Saharan Africa.
Its founders have a combination of private equity and operational IT experience in Africa and the United States. Through this and an extensive network of relationships, as well as offices in Lagos and Johannesburg, it aims to add significant value to portfolio companies.
In October 2008, the European Investment Bank (www.eib.org) announced it would be lead investor, committing $20 million. EIB said CDC Group (www.cdcgroup.com), the UK government-owned fund of funds, would join as the other lead investor with a commitment of $15 million.
At the time, in a press release Plutarchos Sakellaris, EIB Vice President responsible for lending operations in the African, Caribbean and Pacific regions said: “This is a landmark project for the EIB and for the African technology sector. We are confident that Adlevo’s experienced management will build a portfolio of investments which provide strategic support for technology companies. Moreover, we hope that this operation will act as a catalyst to develop private equity and foreign direct investment in the region.”
June 9th, 2010 by Tom Minney
South Africa’s JSE stock exchange (www.jse.co.za) is requiring listed companies to integrate their sustainability reports with their annual reports, with effect from this month. According to a report in Business Day newspaper (www.businessday.co.za) Mervyn King, chairman of the King committee and a leading expert on governance, said: “SA is among the first countries in the world to require integrated reporting of listed companies. This puts us ahead of the game.”
The newspaper says there are still no set standards for companies’ integrated reporting, and Mr King will chair a new Integrated Reporting Committee to issue guidelines on good practice in integrated reporting.
The King Report on Corporate Governance in South Africa 2009 (King III) includes an integrated report disclosure checklist, effective March 2010, according its publication by Ernst & Young. Companies should apply this, or explain why they feel it approroriate not to apply or to apply it differently (“apply or explain”). An integrated report should contain “adequate information on the operations if the company, the sustainability issues pertinent to its business, the financial result and the results of its operations and cash flows”.
Jayne Mammatt, an associate director in governance and sustainability at Ernst & Young, was cited in the newspaper saying an integrated report should evaluate all areas of performance, including economic, social and environmental issues. It was not sufficient for companies to provide wordy platitudes and vague estimates, Ms Mammatt said. It cites a 2009 study by Ernst & Young showed that only a handful of 3,000 sustainability reports around the world were integrated.
Mr King is quoted as saying: “The corporate identity of companies has changed and so reporting has to change. Stakeholders need to make informed assessments about the longer-term sustainability of a company and that it is operating as a responsible corporate citizen.” The requirement is likely to make more work for companies.
The founding organisations of the committee include the Association for Savings and Investment SA, Business Unity SA, the Institute of Directors SA, the JSE and the South African Institute of Chartered Accountants (Saica). Graham Terry, Saica’s senior executive of strategy and thought leadership will chair a working group whose first task will be to develop a framework for integrated reporting.
Leon Campher, CEO of the Association for Savings and Investment, was quoted saying the project was considered a priority initiative, given the volumes of annual reports generated by the association’s members. “We have 153 member companies managing in excess of R2,5-trillion of assets. Integrated reporting will facilitate more holistic and meaningful reporting of financial results, enabling shareholders and clients to gain a better understanding of a company’s triple bottom line.”
Freda Evans, chief financial officer of the JSE, was quoted as saying: “Reporting on the financials alone is no longer sufficient, as all aspects of the business – environmental, social and governance aspects – affect the company’s bottom line.”
Saica CEO Matsobane Matlwa was cited: “Corporate reporting is entering a new era. Shareholders and other stakeholders need broader information to enable them to make more informed decisions about a company. This does not necessarily mean more detail, but greater insight into the strategy, risks and value creation of the company.”
May 11th, 2010 by Tom Minney
Volatility and increased uncertainty in global markets last week meant extra demands for huge trading volumes on world markets. South Africa’s JSE Ltd. handled the increased action and it broke three trading records with record numbers of trades first on Wednesday and then again on Friday. At least one leading US exchange had some error trades last week.
According to figures from the JSE (www.jse.co.za) a record number of 189,253 trades were executed on the exchange last Friday 7 May, valued at more than R30 billion ($4.05 bln). The previous record was set on Wednesday 5 May, with 184,336 trades for a total value of R20.1 bln.
The total number of trades on the exchange for last week was also a record, totalling 751,381 trades. The previous weekly record was 535,883 trades set in October 2008, during the global financial crisis.
Leanne Parsons, Head of Equities Trading at the JSE, says: “This record trading week is due to increased global uncertainty, both in Europe and the United States. This fear in the marketplace leads to increased volatility and increased trading activity.”
Yesterday (10 May), the JSE’s SAVI Volatility Index was at 30.3%, up sharply from 18% a month ago (10 April).
The JSE was launched 123 years ago and used to be known as the Johannesburg Stock Exchange. On 1 March it introduced a new billing model that recognises both low- value and high-volume traders.
Trading statistics for 7 May
Volume 1,018,433,885
Value R30.6 billion (R30,613.4 million)
Number of trades 189,253
Trading statistics for 5 May
Volume 431,071,716
Value R 20.1 billion (20,143.6 million)
Number of trades 184,336
Trading statistics for the previous record 18 March 2010
Volume 539,232,426
Value R26.2 billion (26,160.7 million)
Number of trades 172,433
Values of the JSE All Share Index (3 – 7 May)
Date Value
2010/05/03 28630.82
2010/05/04 27935.85
2010/05/05 27616.68
2010/05/06 27512.83
2010/05/07 26515.07
Source: JSE Ltd
April 25th, 2010 by Tom Minney
South Africa’s JSE Ltd (www.jse.co.za) this week announced that it was close to creating Africa’s first “dark pool” for trading large orders. These are structures that allow bidders to post and transact very large orders or block orders without disrupting the market, for instance prices and volumes may not be revealed publicly before the trade but only get posted after the event.
The Financial Times (www.ft.com) quotes the JSE’s Head of Equity Market Leanne Parsons as saying the JSE’s facility will be called Block X and was the exchange’s “response to market demand when trading in large volumes”.
“Our large users have made it clear to us that while the transparent central order book has numerous advantages, they would also like hidden-order functionality. This is offered in other markets which offer trading in JSE-listed securities,” she said, referring to multilateral trading facilities (MTFs) such as Chi-X, BATS Europe, Nasdaq OMX Europe and Turquoise
Ms Parsons added: “As competitive pressure in the exchange environment builds, innovation becomes increasingly important.”
Worldwide exchanges found recently that the average order size has fallen by 52%, caused by high frequency and automated or algorithmic trading. Last month the JSE changed its fee structure “to recognise both low-value and high-volume traders”.
However, for many years banks and brokers have set up their own dark pools, for instance initially calling each other when clients have large orders or significant stakes in a company so that the market would not start to move share prices up or down in response. Prices and trades may or may not be revealed after the trade, and some of the trades would bypass a stock exchange entirely. This has led to the development over the years of trading systems on or off the major exchanges.
According to a presentation that JSE CEO Russell Loubser prepared for the World Federation of Exchanges (www.world-exchanges.org) in October 2009, their survey of major exchanges that had or had not introduced these facilities found that main reasons for setting up or intending to set up such a facility were: Mitigate market impact of large trades; provide confidentiality or trading anonymity; improve liquidity levels; cost efficiency; new regulations (MiFID); adding value; avoiding defragmented market; and others. Those that did not want to set itup responded that they were concerned about additional fragmentation; do not see the benefits; or have market mechanisms not suited for dark pool offering.
Dark Pools represent less than 10% of trade volume on the European equity shares market. According to Mr Loubser, in the US the figure was closer to 14% of equity trading volume.
Two years ago the EU Markets in Financial Instruments Directive (MIFID), came into force. It allowed for the opening up of new trading systems, particularly in the equities market (see helpful background on The Official Board website www.theofficialboard.com). In order to ensure market transparency and integrity this Directive establishes pre-trade and post-trade transparency requirements. For example, the directive’s pre-trade transparency requirements include the obligation to make public on a continuous basis current bid and offer prices and the depth of trading interests at these prices during a continuous basis during trading hours.
However, MIFID allows for the waiver of these obligations for transactions that are large in scale compared to normal market size. The aim is to prevent the acquisition or transfer of a large number of shares from triggering a large increase or decrease in share prices if this order were made public. This has spurred the development of dark pools for block trades, i.e. trading systems that operate without pre-trade transparency.
In the second half of last year there has been increasing debate and regulatory discussions about the impact of dark pools on major world markets.
April 9th, 2010 by Tom Minney
South Africa could be the centre of mining finance for Africa, according to Mick Davis, CEO of international mining company Xstrata (www.xstrata.com), as reported in the local Business Day (www.businessday.co.za) newspaper. However, he is reported to have told a business school audience that restrictions by the JSE Ltd stock exchange (www.jse.co.za) and remaining exchange controls made this almost impossible to achieve.
Africa contains some of the world’s richest untapped mineral deposits and could be the world’s next major copper- and cobalt-producing region. Mr Davis says that South Africa should allow free flow of funds in and out and scrap exchange controls completely if it wanted to attract foreign resources companies to the JSE.
Xstrata reportedly operates in 20 countries and is evaluating 20 new projects across the globe. It is listed in London and has 15% of its assets in South Africa, Mr Davis is described by the newspaper as “the maverick CEO who has built Xstrata into a major global resources player in just 8 years”.
According to the report, he said the commodities “super-cycle” was not over yet – but that if SA wanted to take full advantage this time, the government and mining industry had to work together to restore the mining industry’s competitiveness. He cited unstable transport and energy infrastructure, skills shortages and “constrained capacity” in regulatory bodies as factors that had prevented SA’s mining sector reaching its potential.
“The mining sector’s GDP (gross domestic product) contribution actually shrank by 1% during one of the greatest natural resource booms in history.”
The medium- term outlook for commodities remained very promising. Driving forces of the “secular change” in demand in recent years – industrialisation and urbanisation, particularly in China but also in India, Brazil and others – were still in place. However, the supply side remained fractured and the financial crisis has delayed many projects, making it more likely that the supply of certain commodities would fall significantly short of demand.
He also called for amendments to the regulations that prevent foreign-listed companies from enjoying full indexation on the JSE, saying without this there would be no liquidity in such companies’ shares, which would mean they would not be able to access capital in SA and so would not waste time or money listing on the JSE.
It is important for listed companies to be included in the FTSE/JSE indices so that funds that track the index are obliged to invest in their shares. Companies such as Anglo American, which moved its primary listing to London but retained a dual listing on the JSE, are included in the index. Newer entrants are not, such as British American Tobacco, which gained a secondary listing on the JSE in 2008. Xstrata has the fact that it cannot get indexed is a potential problem.
According to the newspaper, Mr Davis said major global players had operations across the globe and if there was uncertainty in one country about the regulatory, financial or political regime, investments would be diverted to another.
Security of energy supply was critical. Power utility Eskom should continue to be the major generator of power. However it was quicker and cheaper for resources companies to build their own generation capacity, all they needed was a credible price and the right regulation.
April 5th, 2010 by Tom Minney
Companies on Johannesburg’s Alternative Stock Exchange (AltX), a division of the JSE Ltd (www.jse.co.za), continue to struggle to attract sufficient mainstream attention. However, at a recent conference, one fund manager told them to concentrate on running their companies well and not to watch the share price continuously.
According to a report in Business Day (www.businessday.co.za) newspaper, investor activity has been low on AltX, which was established in 2005 for small and medium-sized companies that do not necessarily meet the requirements of the JSE main board.
Problems had occurred with unregulated instruments such as contracts for difference (CFDs a contract between a trader and provider to exchange the difference between opening and closing price of the investment they are written on, including index, share or commodity) and single stock futures (SSFs – futures contracts written on a particular share, usually in batches of 100). CFDs are popular because they allow companies with smaller market capitalisation to trade higher volumes than traditional trading, while using less capital. In both cases trading occurs on speculated price movement, not the purchase of the nominated instrument.
Senior GM of the JSE, Noah Greenhill, said both highly geared futures were no longer tradable on the AltX.
Stanlib chief economist Kevin Lings said many investors had focused on companies with a long record of stability and liquidity during SA’s recent “great recession” and avoided “smaller companies”. Alphen Asset Fund manager Phillip Wörz said too many CEOs were overly concerned about their share prices: “Too many bosses are watching their Reuters wristwatches at meetings. They should focus on running their businesses well, and we’ll take care of the share price.”
The manager of primary markets at the London Stock Exchange (www.londonstockexchange.com), Richard Webster-Smith, explained how London’s Alternative Investment Market (AIM) had gained “a strong reputation” among institutional investors. Institutional investors (70%) had focused on the fundamental qualities of companies, while retail investors (30%) had responded to emotion, he said. JSE business development manager Lauren Czepek says AltX has 40% institutional and 60% retail investors, including management shares.
Webster-Smith said nominated advisers (NOMADS) had done well in monitoring UK corporate governance standards for AIM companies. Some AltX companies felt designated advisers – SA’s version of NOMADS – needed to be more strictly punished for any actions not in the interests of good corporate governance.