Financial Mail - Investors Monthly
Breaking the chains
New Cape stock exchange will offer more opportunities, writes Anthony Clark
The
lists the world’s oldest stock exchange as being founded in Amsterdam in 1602. Its main purpose was to provide capital to the United East India Company. A more formalised trading exchange, The Amsterdam Stock Exchange, was founded in 1611.
The heyday of stock exchange formation was the 17th and 18th centuries.
The first stock exchange in the US was The Philadelphia Stock Exchange, now known as NASDAQ, founded in 1790. Two years later The New York Stock Exchange (NYSE) was founded. Today it’s the largest exchange in the world.
In the UK, trading at various Royal Exchanges in goods such as corn, salt, wool, cotton and coal had been in existence for hundreds of years. But when merchants gathered in coffee shops in the City of London, especially Jonathan’s Coffee House in 1773, a new stock exchange in the UK was formed. The London Stock Exchange was founded in 1801.
The Australian Stock Exchange (ASX) was only created in 1987 with the integration of six independent regional exchanges, many dating back to the 19th century and the gold rush in that country.
By the 1850s Australia had stock exchanges in Hobart, Brisbane, Adelaide, Perth and elsewhere.
With the amalgamation of six regional exchanges into the ASX, the exchange was also the first in the world to demutualise and list on its own exchange in October 1998.
Surprisingly the first SA stock exchange was not in Joburg, its current home for the past 134 years. The Johannesburg Stock Exchange (JSE) was founded in 1887 to raise capital for the newly discovered Witwatersrand gold fields. But it was not the first in SA.
The Kimberley Stock Exchange preceded the JSE by six years. It was the first such exchange in SA and came into being as the diamond fields of Kimberley required development and exploration and capital was needed to undertake, consolidate or expand diamond companies.
Hundreds of diamond companies were listed. Today all have gone as has the exchange. De Beers, incorporated into Anglo American, is the only glittering remnant of a gilded capitalist age dominated by Cecil John Rhodes, Barney Barnato and Alfred Beit.
Back then, SA had numerous stock exchanges. Many emerged to raise capital for local mining-related commodity exploration and extraction. There were also stock exchanges in Pietermaritzburg, Potchefstroom, Klerksdorp and Barberton. All ceased trading decades ago.
For a brief moment Cape Town also had a stock exchange, which opened in 1901. It was a mechanism to continue trading as the JSE was closed due to the South African war. When hostilities ended, the Cape Town Stock Exchange (CTSE) closed as power and trading shifted back to the JSE.
Fast forward a hundred years and the JSE remains the largest stock exchange in SA in terms of listings and capital valuation.
The JSE demutualised itself and listed on its own exchange in 2005 as a publicly traded company. Its current market value is R9.3bn with its peak at near R200 a share in mid2018. Today the stock trades at R107 a share.
Over the past decade, the JSE has acquired smaller exchanges such as Safex in commodities and Besa in bond trading. The JSE has five markets under its umbrella covering commodities, financial instruments, bonds, equities and interest rate derivatives.
However, that monopoly has started to be eroded. The equity listing boom has dried up and delistings from the JSE have become the norm.
Costs, regulation and red tape have constrained the exchange’s growth and desirability alongside changes in the listing environment. The rise of private equity vehicles has eroded many listings that would normally have migrated towards the JSE.