JSE revenue and profit drop in slow trade
Thin trading volumes have hit JSE Ltd, with the company reporting a double-digit drop in interim earnings as low volatility and declining investor sentiment hurt revenue.
"The country is plagued by low growth, [credit] ratings downgrades and a loss of business confidence. It’s a tricky environment to make long-term capital bets and we see the results of that," JSE CEO Nicky Newton-King said on Thursday.
For the six months to June, the JSE’s operational earnings slipped 20% to R453m.
Revenue from the cash equities market declined 19% to R235m. Value traded on the JSE was down 13% year on year after being up 18% for the same period in 2016, she said.
Globally, stock markets have struggled with declining volumes. Data from the World Federation of Exchanges show that value traded globally between January and June 2017 is down 9% on the same period in 2016, reflecting investor caution.
The sale of SABMiller to Anheuser-Busch InBev in 2016 had a considerable effect on trade, said deputy chairman at Sasfin Securities, David Shapiro. The decline in trade was also a reflection of a "shrinking South African market", which lacked the stocks investors wanted.
Global stock markets, particularly in the US, had been driven higher by technology stocks such as Tesla, Amazon and Apple. Barring Naspers, the JSE did not offer these sorts of technology stocks, he said.
Tellingly, foreigners have been net sellers of local equities to the tune of R65bn over the seven months to July. SA’s bond market, meanwhile, has seen net buying of R54bn over the same period amid a global search for yield.
Positively, increased capital raising and new equity market listings lifted the JSE’s primary market revenue 8% to R82m. The JSE has had 10 new listings in 2017. It was in discussions with potential issuers, but they were cautious about coming to market in this environment, said Newton-King.
SA, which had deep and highly regarded capital markets, should encourage companies to list here, even if money was deployed elsewhere, she said.
"If we want people to deploy money here, we have to work hard as a country to create an investor-friendly environment."
The JSE was well capitalised and committed to the implementation of new technology, such as an integrated trading and clearing platform.
The fruits of cost-cutting were evident, with costs rising 1% to R644m, said Newton-King. The JSE would cut about 60 full-time staff, which was expected to save about R100m in the 2018 financial year.