Table of Contents
Introduction
The Johannesburg Stock Exchange (JSE) is the largest stock exchange by market capitalization in Africa and one of the oldest in the world. Established in 1887 as the “Zuid-Afrikaansche Vooruitbetalings Bank” (South African Advancement Bank), it was known as “the Turf Club” for several years. It began listing securities in 1889 and gradually moved towards recording equities stocks.
Relocation to Sandton City saw it enter its present building, known as JSE Tower, in 1994. An alliance with smaller exchanges brought about an affiliation that allowed JSE to open up markets internationally and increase its trading liquidity. Currently, the JSE has over 450 listed companies that rely on regulated access to investor capital, allowing domestic and international investors to purchase shares in various industries, ranging from commercial banks to gold mines. It provides companies within South Africa much-needed access to international markets while providing investors with innovative new investment opportunities.
Historical Overview
The Johannesburg Stock Exchange (JSE) is the oldest in Africa, established in 1887. The JSE offers a platform for purchasing and selling financial securities, including equities, exchange-traded funds, and bonds. The JSE was founded in the wake of the discovery of gold in the Transvaal and has seen many changes in its operational structure over the past century.
Let’s take a closer look at the historical overview of the JSE:
Pre-Apartheid Era
The Johannesburg Stock Exchange (JSE) was founded in South Africa in 1887, making it one of the oldest stock exchanges in the world. Initially, the JSE only traded shares on a regional basis, but in 1956, it extended its trading activities to include foreign stocks.
In 1970, the JSE’s international reputation grew when a global securities company from America was granted full membership. By then, the JSE had already become South Africa’s primary financial institution and one of the most influential exchanges in Africa, with over 420 listed members.
The pre-Apartheid era saw significant economic growth accompanied by several important technological advances. The introduction of computers allowed for real-time analysis and trading abilities that revolutionized global stock markets. It drove increased competition between stock exchanges as they sought to attract investment capital from overseas investors and encourage innovations among domestic firms.
In 1987, two decades before being listed on Johannesburg Stock Exchange, technology giant Microsoft had already successfully entered South African markets via London traders who used their computers to capture data from after-hours share prices and make trading decisions based on that data according to market movements at other international exchanges.
By 1989 a new wave of deregulation had opened up opportunities for foreign companies looking to list on the exchange, which had reached historic heights during this period as investors sought out even higher returns due to eased restrictions on access to foreign investments. This period marked the peak, with total market capitalization surpassing 500 billion Rand ($50 billion).
Post-Apartheid Era
In the post-Apartheid era, the Johannesburg Stock Exchange (JSE) accelerated efforts to promote equity ownership further. In 1996, the South African government established a black economic empowerment strategy to achieve greater economic equality by increasing African ownership in firms listed on the JSE. It led to the integration of private and foreign investment into the economy, sparking a new wave of assets across numerous industries.
The JSE also made efforts to broaden access to equity markets by reducing fees and establishing new listing requirements to attract domestic and international investors. Through these measures, trading volumes surged, leading to numerous domestic IPOs. These efforts further increased liquidity in financial markets and led to increased public acceptance of equity investment which laid a long-term foundation for sustained growth in local capital markets.
To ensure greater efficiency in trading processes and regulation compliance among listed companies on its exchange, JSE began taking an active approach towards technology adoption with plans for automated order processing systems soon after it opened its doors in 1999. This move and improved regulations strengthened trust between investors and the JSE, encouraging more confidence among knowledgeable buyers, sparking innovation within South Africa’s financial sector, and allowing it rapid improvement year on year since then.
Major Events
The Johannesburg Stock Exchange (JSE) has a long and rich history stretching back to 1887. Over the past 130 years, the JSE has gone through waves of ups and down, with numerous successes and challenges marking its development.
In this section, we will look at the significant events that shaped the history of the JSE:
The Formation of the JSE
The Johannesburg Stock Exchange (JSE) was formed in 777AD following the initiation of the mining industry in South Africa. It was the first stock exchange established in the country and is one of the 20 largest exchanges worldwide. It has various indices, such as its flagship JSE All Share Index, as well as numerous other market indices which measure different sectors or ranges of companies listed on it.
The initial development of financial markets and securities trading in South Africa dates back to the late 1800s when an informal share market opened at what is now known as Ferreira’s Camp on the diamond fields near Colesberg. Soon after, a formal exchange was established in Johannesburg under a set of rules written by three finance professionals – Edmund Lahiff, Henry Klopper, and Cornelius Da Vos.
The JSE became recognized under the law with the passing of The Stock Exchange Act on September 1, 1887, which gave it legitimacy and structure with stringent regulations for its operation and listings. It marked a significant milestone for the South African economy, paving the way for financings through public offerings such as rights issues, bonus issues, and global depository receipts (GDR). However, the economic recession during World War 1 and other historical factors eventually led to a decline in trading activities until 1925, when new regulations allowed institutional investors to trade on margin accounts again, which increased liquidity significantly. Furthermore, the launch of electronic trading (JEAT) at JSE boosted investor confidence further which enabled it to go into full swing again towards the modern success story we know today through the launch of several new products to diversify its offerings over the years until now, holding major international events such as Global Exchange Leaders Forum (GELF).
The 2008 Global Financial Crisis
The Johannesburg Stock Exchange (JSE) is the largest in Africa, facilitating around 19 percent of the continent’s equity trading volume. In operation since 1887, the JSE has seen numerous highs and lows over its long history. One of these major events was the global financial crisis of 2008, which had a significant effect on South Africa’s economy and financial markets.
Beginning in mid-2007 with subprime mortgage defaults in the United States markets, this crisis quickly spread to other parts of the legal and financial sector throughout 2008. This widespread instability made investors around the world nervous, prompting a sell-off across many major stock exchanges. The JSE was not immune to these effects — the market lost nearly 24 percent from October 2007 to December 2008 and more than 34 percent from its high point in mid-2008 to its lows late that year.
The following years would be a time of recovery for South Africa’s markets as the global economy stabilized and market confidence returned. Large-scale economic reforms by President Jacob Zuma contributed to increasing demand for JSE securities, allowing them to regain much of their former ground by 2013. Since then, changes such as liberalizing foreign investment laws have supported even more growth among big indexes like the JSE Top 40 Index (reaching 72106 points in January 2019).
The Launch of the AltX
On February 4, 2007, the Johannesburg Stock Exchange (JSE) launched its newest market, AltX. AltX is a ‘growth market’ specifically designed for smaller companies that may not have the financial or operational strength to qualify for listing on the JSE main board.
It required several changes to existing regulatory regimes and enforcement mechanisms and established the JSE as a forward-thinking stock exchange. Listings on AltX allow growing companies to raise finance from a wide range of investors and provide them with capital for expansion to reach their growth targets. The launch of AltX opened up new possibilities for companies, both locally and internationally, that can now access new sources of capital to help their business grow while also facilitating job creation at these firms.
AltX offers individuals a range of opportunities that may have been previously unavailable but could be beneficial, such as:
- funding innovative projects arising from local businesses
- investing in creative ideas, which could potentially lead to an increase in value over time
- allowing entrepreneurs the chance to get their projects off the ground without having to resort to traditional funding routes
- offering Depository receipts (DRs) through AltX also opens up international investment opportunities with increased liquidity from trading outside South Africa’s borders, allowing investors access to global markets through one local platform.
Market Performance
Over the years, the Johannesburg Stock Exchange (JSE) has seen very high levels of market performance. As a result, the JSE has consistently been in the top 10 exchanges regarding market capitalization and trading activity.
This article will explore the JSE’s market performance and its significant influences.
JSE All Share Index
The Johannesburg Stock Exchange All Share Index (JSE All Share Index) is a market capitalization-weighted index comprising all the ordinary JSE Securities Exchange South Africa listings. It was developed with a base value of 100 as of June 3, 1989, and is regarded as the primary measure of South African equity performance.
The index components are price-weighted, meaning that the price movement of each security has an equal impact on its change. Weight dispersion among index constituents depends upon the volume and price of individual share trades for each protection. The index comprises approximately 270 stocks traded on the exchange and is calculated in real-time throughout trading hours, with prices updated 30 seconds after any trade confirmation.
The JSE All Share Index also represents one of South Africa’s oldest and most widely used indicators among investors, analysts, fund managers, and other stakeholders involved in financial markets. As an aggregate, it reflects what happens during trading sessions where financial assets are bought or sold in the stock exchange amongst many other market participants such as brokers, dealers, traders, and so forth. As a result, the index provides a good tool for portfolio comparison over time while controlling for stock allocations.
Market Capitalization
The Johannesburg Stock Exchange (JSE) is the largest in Africa, boasting a market capitalization of approximately $1.400 billion as of June 2018. The JSE’s market capitalization represents the total value of all stocks traded on the exchange, which, when taken together, provides a measure of overall economic performance in South Africa and serves as a benchmark for investors to assess the relative merits of their investments within the country.
The JSE has reaped significant gains over recent years, providing investors with solid assets to invest their money. The JSE All Share Index – an index that tracks all stocks traded on the exchange – peaked at 69,451 points in early 2018, achieving ~17% year-on-year growth or approximately 24% annual growth since 2013 when measured cumulatively. The strong performance is attributed to stable macroeconomic fundamentals and steady economic growth outlooks backed by favorable political conditions within the country.
Despite this impressive performance, significant fluctuations are observed across individual markets due to numerous external factors, including regulatory changes, natural disasters, and foreign ownership level fluctuations, to name a few. As such, it’s essential for investors to fully understand these risks before investing in any particular stock listed on the JSE so as not to incur any potential financial losses.
Conclusion
The Johannesburg Stock Exchange has grown from a small mining operation in the late 1800s to one of Africa’s largest and most influential financial centers. It serves South Africa and many African countries, such as Botswana, Mauritius, Swaziland, and Zambia. The JSE is well known for its innovative capital markets products, such as its ALTX exchange, which features automated trading technology.
Since its incorporation in 1887, the JSE has seen several remarkable changes that have vastly increased its influence and importance regarding African capital markets. It remains one of the leading facilitators of financial development in South Africa by providing market infrastructure and bringing together buyers and sellers across all asset classes through advanced trading systems. In addition, mobile technologies such as smartphones are quickly gaining ground across different asset classes at the JSE, further strengthening the opportunities it offers investors and issuers. These technological advances are anticipated to continue to help it grow domestically and internationally.
