“It’s positives all around. It shows that foreigners are still very interested in the South African stock market, the South African commodity industry and it gives good visibility for a company that does have operations here,” Cadiz Corporate Solutions mining analyst Peter Major told CNBC Africa on Wednesday.
“We didn’t have the ability to just go to the JSE and buy Glencore [shares] until now. It’s definitely a much better market for Glencore than [in] Hong Kong.”
Major added that that Hong Kong had little trade and equally little interest in mining companies. The region, as a result, provided disappointing performance results for Glencore, which is listed there.
The mining and commodity trading company is also listed in London.
“The JSE, for almost 100 years, was in the top seven stock markets on the planet, so the liquidity here will be much better than it was in Hong Kong,” Major explained.
Glencore has operations in 50 countries and focuses on 24 commodities. The company however, only makes 10 per cent of its revenue in South Africa.
Glencore is also the biggest company on the JSE after SAB Miller and British American Tobacco.
“Even breweries which started in this country now have a lot more worldwide [recognition] from South Africa. The fact that Glencore is getting 10 per cent of its revenue from South Africa – I’m surprised it’s that high – but it’s probably going to increase a little bit, whereas BHP Billiton it’s less than five per cent,” said Major.
“Nevertheless, it gives investors in this country access to global companies. It gives us access to companies in the resource sector, a great rand hedge, it protects our pension funds and our savings.”
Glencore’s commodities mix includes copper, coal, nickel and zinc, which is a different variety from the one South Africa’s market is accustomed to.
“It’s very different, and that’s one of the things I really like about it. It’s more of a trader than a mining house. When you talk to management, they say it’s going to stay that way. They tell us [they] don’t want to take over the mining house space from Anglo American and Billiton,” added Major.
“It’s always going to be very different from the large mining houses. We think it’ll give us smoother earnings rather than the volatile earnings you see in a pure commodity company.”