JSE has proved it is anti-fragile

Foreword

The JSE has proved, through the storm of the pandemic, that it is anti-fragile

Foreword

This year has given the world much to lament. The staggering loss of life along with the unprecedented economic impact and the loss of day-to-day freedoms have impacted every facet of our lives. There have been at least half a million infections locally and more than 35 million cases worldwide. Thankfully, as our economy has progressively opened in line with government’s risk-adjusted approach, we have succeeded in keeping infection and death rates on a downward trajectory. Unfortunately, unemployment numbers have not followed this trend. That being said, we also have a lot to be proud of.

On March 12, now referred to as ‘Black Thursday’, the ALSI plunged 9.7%. This was the largest fall since the Asian financial crisis in 1997. During this period, we saw record-breaking volumes trade in our market, which tested our operational resilience. As an essential service, the JSE has a vital role in ensuring uninterrupted market activity. Thankfully, the JSE remained open for business throughout the crisis, with zero downtime. This was crucial for confidence because, during periods of extreme volatility, investors require access to their investments in order to respond quickly. Our continued operation is also crucial to our issuers, who had uninterrupted access to capital during the crisis to support their funding needs. During periods of volatility, our most valuable commodities are trust, resilience and consistency. The JSE’s effective risk-management, prudent post-trade functionality and market regulations displayed exactly that, and our markets cleared and settled effectively despite the record-breaking volumes. We did all this while running the exchange remotely.

Lockdown means different things to different companies. The JSE took a systematic approach to managing remote trading. In the weeks leading up to the lockdown announcement we tested our systems and were confident that trading could continue without disruptions. We engaged extensively with market participants to ensure they were part of the process, ensuring that we communicated more than ever to navigate the transition. We are deeply grateful for their contribution and collaboration. For our staff, many of whom had not run markets from home before, the transition tested our ability to work as a team. I am extremely proud of the way our people rallied to the challenge and worked (often through the night) to ensure our clients remained connected. The practicalities of working from home while running home-schools, tending to elderly relatives and dealing with the challenges of limited physical movement were facilitated by an extensive work-from-home support programme. I am often asked how the JSE withstood the pressures of the crisis. The reality is that resilience is not an overnight nor accidental occurrence. It is built through years of investment in technology, infrastructure and process planning. Resilience is built by teams who are committed to working together towards a singular goal. We are proud that our efforts have been successful, but we remain humble and committed to a culture of constant improvement.

The 2020 year has been historic for the markets. We have emerged from the trough of mid-March and steadily improved. Our resources and industrials indices reflect a significant recovery, led by rand hedges, resources and media counters. This performance contrasts with the devastation in the real economy and by no means reflects the larger economy. But it does mean that investors on the JSE, in particular those tracking headline indices, have recovered much of their earlier losses. At the end of September, the All Share index was down just 4.9% and the Top 40 was down 1.5% for the year. This resurgence has followed a path similar to the US where the growth in capital markets has largely shielded investors from the downturn in the real economy.

As a mountaineer, I have often noted that during a climbing expedition, climbers work together to ensure no one is left behind. We now have an unimaginable summit ahead of us: the challenge of emerging from the crisis without widening the deep inequality divide. In the financial markets, we have a privileged position. And privilege obligates us to play a role in supporting our country’s economic recovery. We remain committed to the youth of this country and to playing our part in making sure we leave no one behind. When we look back on this crisis in years to come, I hope that we do so knowing that we emerged more resilient and with a stronger commitment to clients and colleagues. In support of the President’s Solidarity Fund we pledged all revenues earned by the bourse over two days. We called on market participants to join us and the response was overwhelmingly positive. In the end, we were able to hand over R35 million to the fund. A number of JSE employees contributed in their personal capacities in a salary pledge. In addition, the JSE board and executive donated 30% of their salaries.

Looking ahead, the future is not without challenges. Many of the difficulties our economy was facing prior to the crisis have been exacerbated in recent months. Government and businesses will find themselves having to do a lot more with a lot less. SA’s fragile fiscal position, struggling SOEs and persistent global risk off sentiment continue to weigh on investor sentiment. However, we have a lot to be optimistic about. We have deep, liquid markets that have proven themselves over this crisis. We also have a plethora of well-managed blue-chip companies, and our bond yields are extremely competitive compared to other markets. If we are to conquer the climb ahead, we must join hands and go forth, one step at a time.

Leila Fourie
JSE Group Chief Executive Officer
Ocotber 2020