Is the JSE really shrinking?

CHANGING RAND VALUE A BIG CONSIDERATION

Foreign investors sold a net R123.9 billion worth of JSE-listed equities in 2016, equal to more than they had cumulatively bought (on a net basis) since mid2008.

They have been net sellers of local stocks for five of the last 10 years (five of the last six), according to JSE statistics. This trend follows the ongoing weakening of the rand from the R7:$1 level in 2011 to an average above R14:$1 in 2016.

The actual value traded (in rands) has since soared on the back of the exchange rate.

In dollar terms, gross purchases in 2016 were about $68.7 billion (R888 billion), barely higher than the approximate $63.8 billion purchased in 2011.

The outflow trend has not yet turned, with net sales of R16.1 billion in equities in January and R9.6 billion in February.

The interest rate (bond) market saw strong inflows in 2016 (R32 billion), despite R6.7 billion in net outflows in December, which continued into January (-R5.3 billion). February saw net purchases of about R5.8 billion, for a year-to-date inflow of R441 million.

Magnus Heystek, in a column last week (Why foreigners are fleeing our market), offered some thoughts. Very simply, he argues: “Over the last five years, the US dollar-return for foreign investors has been zero.”

Nevermind that the All Share Index has been treading water at around the 50 000 to 52 000 point level since 2014.

The total market capitalisation of JSE-listed companies has increased by 138% over the last 10 years, from R5.69 trillion in 2008 to R13.58 trillion at the end of 2016.

Naspers, AB InBev and Glencore have helped drive this figure higher. Add new equity raised, and you easily make up the bulk of the change in value. 2016: R13.581trn 2015: R11.728trn 2014: R11.505trn 2013: R10.62trn 2012: R8.384trn 2011: R6.909trn 2010: R6.699trn 2009: R5.929trn