JSE hoping for a better year
• Company reports 5% decline in operating revenue on lower trading values and volumes amid negative sentiment
JSE CEO Nicky Newton-King is hopeful 2018 will be better for Africa’s largest exchange than 2017, as local sentiment improves and key technology projects are delivered.
“When the national sentiment is more positive that is good for capital raising, for entrepreneurs feeling like there’s an opportunity to do something and investors feeling that they should back people who are prepared to put some effort in,” Newton-King said on Wednesday after the release of underwhelming annual results.
The JSE Ltd reported a 5% decline in operating revenue to R2.2bn for the year to December 2017, as trading values and volumes fell. Group earnings were down 9% to R836m, while cash equities trading revenue slid 11% to R507m.
The political and economic uncertainty that plagued SA in 2017, coupled with credit ratings downgrades, weak growth and a loss of business confidence, led to a decline in long-term capital market investing by locals and foreigners.
But the situation had already improved, said Newton-King. Foreigners were net buyers of South African equities to the tune of R30bn in December and R11bn in January. “You would expect that to get better as soon as investors have confidence that the country is on a growth trajectory,” she said.
The JSE, which listed 21 issuers in 2017 (18 in 2016), had traded R510bn in January, an average of about R23bn a day.
Additional capital-raising activity in 2017, such as Sibanye Gold’s $1bn rights offer to purchase Stillwater Mining in the US, had led to a 10% increase in the JSE’s primary market revenue to R181m.
A 24% year-on-year reduction in headcount as a result of retrenchments and a hiring freeze had helped the JSE save costs, said Newton-King.
Capital expenditure fell to R187m from R205m, as the JSE made progress on its integrated clearing and settlement platform and the exchange-traded platform for government bonds, both targeted for delivery in the first half of 2018.
Once these were imple- mented, the JSE would revisit projects it had “put on ice”, such as its mooted township exchange, Umnotho. The bourse would also focus on more effectively monetising its post-trade and information services, which had disappointed in 2017.
On the effect the December collapse of Steinhoff’s share price had had on the JSE’s image, Newton-King said that with “reports and rumours” about other companies, the debacle had “certainly shaken peoples’ confidence”.
Stocks such as Capitec, Discovery and Resilient, actual and suspected targets of reports published by short sellers, have experienced sell-offs in 2018.
“The fact that people reacted to rumours in particular is a function of the really fragile trust [in SA] at the moment. The reaction is far more emotional than one built on substantive issues.”
While the JSE has faced criticism over inaction regarding potential market abuse, she said “where activity requires investigation” it would investigate.
“Those of us who are custodians of governance really have to look at what else we can do to help investors feel more confidence,” said Newton-King.
The JSE Ltd declared a dividend of R6,05 per share, an 8% increase on the previous period.
CUSTODIANS OF GOVERNANCE … HAVE TO LOOK AT WHAT WE CAN DO TO HELP INVESTORS FEEL MORE CONFIDENCE