New investors flock to JSE
'Any young person who has a little bit of money is going to start looking at the stock market'
EasyEquities, one of the biggest online share-buying platforms in SA, has experienced a dramatic surge in new customers since mid-March - an estimated 200% to 300% increase - as mainly young investors seek bargain-buying opportunities in the wake of the market volatility caused by Covid-19.
Charles Savage, CEO of Purple Group, which owns EasyEquities, said the investors seeking to buy shares on the platform are generally younger than 35 and taking a medium- to long-term view on their investments. The average size of each investment is about R30,000.
"We are performing better in this crisis than ever before and that's not what the textbooks taught me. In every other crisis I've experienced, investors ran away from the market. Our clients are running towards the crisis, seeing it as an opportunity to get into the market," said Savage.
What he thinks is different this time, compared with the 2008/2009 global financial crisis, is the unprecedented access to data that people have through their smartphones. Smartphones did exist prior to the global financial crisis, but were still in their infancy, with most financial and market information still the "privilege of people who sat behind Bloomberg terminals in a bank".
Savage said there has been a democratisation of information and data "around financial markets" and that this means that during this latest crisis, no-one has more access to information about Covid-19 than anyone else.
"People have had more time sitting at home and everything is about the impact of Covid-19 on the markets. More people are also reading the news or watching it on TV than ever before."
He said these new clients are not "day traders" looking at speculative trades, but investors seeking long-term positions.
For example, a lot of people followed the dramatic share falls in Sasol over the past month or so, and wanted to invest in the stock at bargain prices.
"We saw inflows into Sasol of R300m or R400m and the average entry [share] price was R55. Sasol is now sitting in the R80 range. We've seen a great period of depressed asset prices. They create a lot of value," said Savage.
But day traders have also been piling into the market.
Shaun Murison, senior market analyst at IG Markets SA, which is part of the FTSE-listed IG Group and offers leveraged trading to high-frequency or day traders, said the group has seen a "dramatic pick-up in account applications, as well as the number of clients following through with those accounts".
"Trading activity has increased exponentially as well, as clients try to take advantage of the current market volatility."
Sasfin Securities deputy chair David Shapiro said that with most global sports events on hold, everyone is turning to the stock market to "indulge their speculation".
But he said this trend of increased participation in the stock market by younger investors is "going to last".
"A lot of youngsters are coming through and building portfolios. Any young person who has a little bit of money is going to start looking at the stock market."
Shapiro said the biggest threat to traditional stockbroking houses is that it is unlikely the children of their present clients are going to make use of their services. Instead, they are likely going to want to manage their investments themselves with the use of fintech applications.
Simon Brown, founder of financial education platform Just One Lap, said anecdotal evidence in the market is that from mid-March until now there has been a "dramatic increase" in new investors. "It's just been absolutely crazy," he said.
Brown said all the online brokerages he has been speaking to are reporting "record sign-up rates".
The JSE doesn't give a breakdown between retail and institutional investors, but it noted significant growth in the value of deals concluded from January until May 13, compared with the same period in 2019. The value of shares traded on the equity market from January until May 13 was about R2.1-trillion, compared with about R1.6-trillion for the same period last year. A total of about 40-billion shares changed hands compared with 27-billion in the same period last year. The number of deals for the year to May 13 rose about 47% compared to the same period last year.