JSE in serious trouble
Companies listed on South Africa’s Johannesburg Stock Exchange (JSE) are at a 30-year low, dropping 56% since 1998.
Data compiled by The Outlier showed that Listings peaked at 669 listings in 1998, but the dot-com crash led to 128 companies delisting within 2 years.
“Between 2003 and 2008, there was a brief resurgence with the introduction of AltX, which aimed at small- and medium-sized enterprises, but this was short-lived due to the global financial crisis.
Companies often delist because of mergers, acquisitions, or relocation abroad.
However, the JSE has found it challenging to attract sufficient new listings to compensate for these losses.
In 2022, AmaranthCX issued a warning about a series of delistings from the JSE. The company mentioned that South Africa had 332 listed companies across the JSE and the three challenger stock exchanges at the beginning of 2022.
By the end of 2023, 11 delistings had taken place, with two more delistings occurring so far in 2024.
Sean Neethling, the head of investments at Morningstar South Africa, has expressed concerns about the future of investing in local equities due to the delisting trend.
He mentioned that the shortage of new listings, the relatively weak performance of local shares, and the depressed levels of business confidence have further exacerbated fears among market participants.
Despite the warning signs, JSE CEO Leila Fourie has recently introduced several initiatives to reverse the downward trend.
The JSE recently finalized new requirements and amendments for listed companies to reduce red tape and simplify compliance.
This includes allowing secondary listings for companies primarily listed on the Hong Kong Exchanges & Clearing.
Fourie anticipates as many as 10 listings in 2024. “We are optimistic that it is looking better, but we’re cautiously optimistic,” she said.
What’s more, renowned economist Dawie Roodt has pointed out that the stock exchange is currently undervalued and that a positive outcome from the elections could boost the equity and bond markets.
According to Roodt, the JSE is lagging behind similar global markets by 30% to 50% and has not experienced the same growth as other global markets in the past eighteen months.
He believes that positive news could potentially increase the JSE by 20% to 30%.
Roodt stated, “The JSE is a highly undervalued market,” suggesting that South African equities are priced at a bargain.
Additionally, he mentioned that South Africa’s capital market offers yields of around 10%, and a positive election outcome could increase the market by 200 basis points.
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