From the CEO

From the CEO

As we enter the 2020s, it’s worth taking a moment to reflect on how we began and ended the past decade. I am sure we all remember what it felt like to welcome more than 3 million football fans from across the world for the 2010 FIFA World Cup. Fittingly, the close of the decade saw us united once again in our shared passion for rugby when we watched with pride as the Springboks lifted the Webb Ellis Cup at the 2019 Rugby World Cup.

Notwithstanding the political and economic challenges we have faced as a country in the past decade, and despite a demanding local and global operating environment, the JSE has seen substantial growth. Exchanges the world over act as a barometer of the economic health of a country and the companies listed on that market. The JSE continues to be positioned among the top 20 largest exchanges in the world, with a market cap of more than R17 trillion. Over the past decade the JSE’s equity market value traded has increased from R2.8 trillion to R5.2 trillion in 2019.

The derivatives market has also shown significant growth in the last decade with the JSE’s commodities market experiencing 64% organic growth, with the number of contracts traded increasing from 2.1 million to 3.5 million in 2019. In the currency derivatives market, value traded grew to in excess of R1 trillion per annum, year on year. The number of interest rate derivative contracts traded grew from fewer than 1 million contracts in 2010 to more than 11 million in 2019. In 2019, the JSE’s market cap to GDP was more than 300%, demonstrating that our exchange not only supports the local economy, but also provides a platform for SA companies to expand globally.

Global investors are seeking yields, which is good news for the country. Leaning strongly towards risk-adjusted returns, the yields that SA offers relative to many other countries are attractive and remain a possible magnet for flows. In a 2019 research note by Bank of America Merrill Lynch titled South Africa Coming Back, nine of the top 20 emerging market stocks recommended to investors were South African. The note took a bullish view on SA, noting that its higher ranking is driven by earnings growth and strong momentum. The nine stocks chosen were from our mining sector. Our metals, including gold, palladium and platinum, have outperformed all other products.

In February, the national Budget Speech to be delivered by the Minister of Finance should give investors a clearer idea of where we might see growth in the economy this year and, by extension, the outlook for the exchange.

Another important event is the impending Moody’s review of our credit rating. With Moody’s negative Baa3 outlook in November 2019, a possible downgrade would leave SA without an investment-grade ranking for the first time in 25 years. We remain cautiously optimistic that, with concerted effort by government to find solutions to the challenges presented by our state-owned enterprises and our fiscal deficit, this may be avoided. As always, this year we will continue to play our part in driving improved economic growth by delivering on our strategy. This is anchored in co-creating value for our broad range of stakeholders by enhancing our product and service offerings. We are pursuing both organic and inorganic growth opportunities, and working with partners where it makes sense to do so. Our FTSE/JSE Bond indices are a perfect example of this. Also, high on our 2020 agenda is transitioning to a ‘future-fit’ market. Achieving this requires attracting and retaining diverse top talent in financial markets.

We have an ongoing commitment to rebuilding trust and confidence in our market. Our new debt listing requirements, cybersecurity enhancements and market-functionality advancements are all aimed at achieving this and ensuring the attractiveness of our markets to local and international investors alike. To this end, the JSE will continue to collaborate with business and government to promote #SAInc as a global investment destination.

Sustainability is a key focus and we will be introducing social impact bonds this year to drive socially responsible investing. As the co-chair of the UN’s Global Investors for Sustainable Development Alliance initiative, I am part of a team that is working to leverage finance and investment know-how in a bid to free up trillions of dollars from the private sector to finance the UN’s Sustainable Development Goals. This is aligned with the JSE’s status as a global leader in advancing the sustainability agenda. Economic growth that is not inclusive can never be sustainable. We recognise this and have put the democratisation of finance at the heart of our strategy. By delivering innovative, affordable and accessible products aligned to the needs of the local economy, we hope that our next decade will be even better than our last. We have so much to celebrate as South Africans, but even more to look forward to. This is a step that I look forward to taking with you in 2020.

Leila Fourie
JSE Group Chief Executive Officer
January 2020