Fighting the curse of companies leaving the JSE

17 Nov, 2023 - 00:11 0 Views
Fighting the curse of companies leaving the JSE Johannesburg Stock Exchange

eBusiness Weekly

Among numerous changes, the JSE can now list infrastructure Reits that meet the definition of property as contained in the adapted listings requirements

It is fair to comment that the Johannesburg Stock Exchange (JSE) is fighting for survival, even if it is still the continent’s biggest and best stock exchange.

Trading volumes have shown little growth over the last few years and have declined lately. A lot of companies have opted to delist, and local investors have steadily been moving their money offshore.

In addition, apart from solid trading volumes in the shares of local banks, most of the buying and selling on the JSE involves the shares of a handful of large international companies.

During the second week of November 2023, trading activity was dominated by Richemont, with investors trading R1,5 billion worth of shares, followed by Naspers (R1 billion) as the bulk of its value is represented by Tencent. Just more than R516 million worth of Anglo American shares and R506 million of AngloGold Ashanti shares were traded– both having cut their interests in SA over the years.

Highest traded shares

The first SA company to feature on the list of the highest weekly trading by value is TFG, with investors trading R418 million worth of shares, followed by Capitec and FirstRand, hovering at around R380 million worth of trade each.

In all, the investable universe on the JSE has shrunk to the 100 largest companies – some would say the largest 40 companies.

Responding to queries, the JSE says that only 40 new companies listed on the JSE during the last five years. In contrast, 130 companies were delisted.

There are currently only 287 companies listed on the JSE compared to 389 a decade ago.
“Over the past year, delistings on the JSE has become a topical issue for investors and commentators,” according to the JSE.

“This is not isolated to South Africa; it is a global phenomenon. It is important to keep in mind that listing activity is driven by market sentiment and the macro-economic situation of a country.

“Globally, we have observed that where there is high initial public offering (IPO) activity, it is supported by GDP growth and sectoral policy measures,” it says.

Fighting back

The JSE has initiated several projects to woo back investors and companies, largely aimed at making it easier for companies to list.

“In May 2022, and as part of its ongoing efforts to ensure that the bourse is fair, efficient, transparent and competitive, the JSE released a consultation paper, requesting stakeholders, investors, issuers and the general public to comment on a raft of proposals to reform the JSE’s listings framework,” it says.

“One such proposal was the Simplification Project, which along with the other proposals, received overwhelming majority support during the consultation.”

It says it issued a response paper to this effect in August 2022

The simplification project aims to simplify initial listing and ongoing requirements using plain language to record concise regulatory objectives, allowing a better understanding and application of the requirements by listed companies, sponsors and investors.

“The project is not limited to pre-listing statements and prospectuses, but will be applied to the whole body of JSE requirements,” according to the JSE.

“An additional benefit of the simplification will be the significant reduction in the volume of the requirements.

“During the process, the JSE will also assess the regulatory relevance of each provision and ‘cut red tape’ where possible to ensure that the requirements are fit for purpose, aimed at an effective and appropriate level of regulation.”

The JSE released the first four sections of requirements for public consultation (commencing on 30 September 2023). The next two sections were released this week.

The JSE expects the project to take approximately 12 to 18 months to complete.

Changes that have been implemented

It says several other proposals the JSE initiated with its 2022 consultation paper to reform its listings framework have already been implemented after the Financial Sector Conduct Authority (FSCA) approved the amendments. — Moneyweb

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