Fully engaged - JSE MAGAZINE

Fully engaged

Udesh Moodley, Head: IRD, Bonds and Currencies, Capital Markets, on the division’s crucial role as the JSE’s client-relationship interface

Fully engaged

Q: How would you describe the division’s role?
A: Essentially, client relationships. We are exceptionally focused on the day-to-day engagement with JSE clients to oversee their needs, solve their problems related to all JSE products from an operational perspective, and meet any new financial needs. We also have strengths in product development, which we derive from examining market trends and assessing suitable products within the current economic context so that our clients can invest, and hedge, more effectively in the market.

Q: What is the volume value of the trades on the JSE?
A: This is an aspect that our clients use to gauge growth in the market. Currently we do a daily turnover of, on average, R40 billion per day in the cash bond market. It is one of the largest bond markets in the world in terms of volume of trade – and certainly the largest in Africa. This attracts both foreign and local investors, of which the foreign bond holdings’ percentage of net purchases and holdings is between 20% and 30%, on average. Another portion of the bond market is the repo, which has a daily volume of around R90 billion per day, and the currency market turns over some R3 billion per day. From a listed-product perspective, the JSE is the leader in Africa.

Q: What are a few of the revenue numbers worth highlighting?
A: This division handles between 8% and 10% of the JSE’s total business. If you look at the asset classes, we’re responsible for about 15% to 20% of the revenue stream within capital markets.

Q: How can investors cope with fluctuations that are caused by economic impacts?
A: It doesn’t really matter what the markets are doing because different climates attract different investors; it all depends on the underlying needs and uses of those capital investors. The JSE, in providing the infrastructure, has the capability to take care of all of those needs at any given time. Having said that, it is important to distinguish between short- and long-term investing. Short-term investors favour volatility of the market. The long-term investors, such as pension funds and hedging participants, need more price certainty and stability.

Q: What are some of the global factors influencing the equity markets?
A: The current global macro environment has been dominated by themes of quantitative easing from the European Central Bank by increasing money supply in order to stimulate economic growth in the eurozone. Trade wars are another aspect resulting from President Donald Trump imposing sanctions and tariffs on US trade partners, with the global impact affecting local companies’ performance.

Q: And locally, what are a few of the risks and challenges?
A: We can take from President Cyril Ramaphosa’s most recent SONA, where he highlighted the performance of Eskom, high unemployment and low-growth scenarios. There is a need to resolve the Eskom crisis quickly and with the lowest-possible impact on the fiscus. SA also needs clarification on the land expropriation issue. There is, too, the possibility of a credit downgrade of SA from investment grade, which would have a huge impact on capital flows into and out of the country.

Q: What are the JSE’s most effective and relevant trading products?
A: Most if not all of our products are effective and relevant due to their standardised nature and the technological infrastructure provided by the exchange. They include spot or cash products across all government bonds and listed equities, and derivatives products, which include bond futures and options; currency futures and options; single-stock equities futures and options; and index-equity options and futures.

Q: Is there any room for change in the way existing products perform, or new products that are relevant to current trading conditions?
A: The local bond and interest rate markets have significant scope for improvement of liquidity and transparency by moving these markets to an electronic platform. The JSE has successfully completed the ITaC platform implementation, and this opens opportunities to move more products to trading on-screen and in line with international markets. We will see a lot more movement to onscreen in forthcoming months and years, as regulation and market participants bring themselves in line with international trends.

Q: Can we expect any changes to the division?
A: Yes and no. The existing structure of the team is not going to change. However, we will be focusing our energy on new product development and building new revenue streams, as well as expanding our client base. We will be working and collaborating with existing market users of JSE products, as well as various advisory committees that meet regularly to discuss what further value we can add to the market. This means looking at what participants and competitors, such as the NASDAQ, are doing and how we can adapt their products to the local market. We will continue to undertake a rigorous exercise to determine new product ideas and possible changes to market structure. No matter what changes are forthcoming, my division will continue to ensure that all JSE clients are heard and that we respond to their needs.

By Kerry Dimmer