JSE hemorrhages foreign money

The Johannesburg Stock Exchange (JSE) has been facing challenges with declining foreign investment over the past few years, as discussed by Valdene Reddy, Director of Capital Markets at the JSE, in a recent interview with CNBC Africa. Reddy highlighted the decrease in foreign participation in the South African market, attributing it to various factors such as macroeconomic conditions, political instability, and global market dynamics. According to Reddy, foreign investors have been showing a general sell bias towards the JSE, with a consistent decrease in foreign participation over the past five to six years. She mentioned that South Africa's relevance relative to other markets has been a significant factor, with the US market dominating global trade activity, while emerging markets like India, Saudi Arabia, and China have shown growth potential. These external factors have contributed to the diminishing foreign participation in South Africa. The interview also delved into the impact of local politics and economic growth on foreign investment in the JSE. Reddy acknowledged that South Africa's macro and micro details, including factors like growth, fiscal stability, political certainty, and infrastructure spend, play a crucial role in attracting or deterring foreign investors. Despite the country's deeply discounted market offering value, concerns around currency volatility, low growth environment, and fiscal stability have weighed on investor confidence. In terms of sector trends, Reddy noted that foreign investor activity in the JSE has been concentrated in the top 40 to top 60 counters, rather than specific sectors. The market has diversified post-2008, with a mix of resources, South African stocks, Rand hedge plays, and dual-listed defensive stocks. South Africa's bonds market has seen decent interest from foreign investors due to the country's strong yield perspective, offering a balanced investment opportunity amid global uncertainty. Regarding market valuation, Reddy highlighted that South Africa trades at a significant discount compared to intrinsic values and net asset values of companies in the market. Despite the value proposition, South Africa's weighting in global indices has decreased over the years, indicating a need for renewed investor interest and participation in the JSE. When discussing the influence of politics on market dynamics, Reddy emphasized that global market sentiment is currently driven by political factors, making it challenging to attribute the decline in foreign investment solely to South Africa's squabble with the United States. She stressed the importance of building diverse relationships and maintaining a balanced approach to market partnerships. In conclusion, Reddy mentioned that foreign participation in the JSE has decreased over time, with foreign ownership in local companies showing a decline. While the exact percentage of foreign volume in the market is hard to specify, there is room for increased foreign participation to stimulate market growth and activity. The JSE will need to focus on attracting foreign investors through strategic initiatives and value propositions to enhance its position in the global market landscape.