New listings on the Johannesburg Stock Exchange are drying up as companies weigh the possibility of government takeovers and transaction tax changes deterring investment, according to bourse operator JSE Ltd. (JSE)
No new companies have listed shares this year after the exchange recorded 16 in 2011, Chief Executive Officer Nicky Newton-King said in an interview yesterday. A total of 10 exchange-traded products have joined the bourse in 2012, in addition to last year’s 14, she said.
Concern is growing that the ruling African National Congress may move to nationalize companies this year, while new transaction taxes will add to trading costs, Newton-King said. The exchange reported a 12 percent jump in trading volumes yesterday for the year through December, while earnings per share minus one-time items rose 29 percent to 5.62 rand, below the 5.64 rand median estimate of four analysts surveyed by Bloomberg.
“The reality is that while we are in a year of the ANC’s policy conference and leadership elections, that does create an environment which has heightened uncertainty,” Newton-King said by phone in Johannesburg. “From a policy perspective, certainly when we talk to potential issuers, they consider us relative to other jurisdictions.”
ANC party members vote for a new leadership in December and will discuss mine ownership at a party policy conference in June, according to Enoch Godongwana, the head of the party’s economic policy committee.
The push for a policy shift has been led by the ANC’s Youth League, which wants the government to seize mines, banks and land. Several senior government ministers have rejected nationalization, and on Feb. 29 the ANC expelled the Youth League’s leader, Julius Malema, from its ranks. Malema said he plans to appeal the expulsion while the league has vowed to push nationalization without Malema.
The proposal to eliminate a rule that makes brokers exempt from securities transaction taxes announced in South Africa’s annual budget on Feb. 22 is under discussion with the National Treasury, Newton-King said.
“Our conversations with Treasury are going well,” she said. “We need to understand what their concerns are about how people are currently accounting for their transactions.”
The JSE will sign cooperation agreements with other exchange operators similar to those it has with CME Group Inc. (CME), the Chicago-based derivatives exchange, and the London Stock Exchange, rather than merging with or acquiring other bourses, Newton-King said. Mauritius’ Financial Services Commission blocked plans for the JSE to buy a 49 percent stake in the Stock Exchange of Mauritius in 2009.
Move From London
Moving the JSE’s trading platform back to Johannesburg from London in July will be positive for revenue as clients trade faster and the bourse offers them information technology-related services, Newton-King said.
The business was moved to the London Stock Exchange in 2002 as volumes exceeded the capacity of the Johannesburg exchange’s system at the time.
The JSE plans to boost the contribution to earnings of post-trade services from the current 10.5 percent, she said.
Shares of JSE Ltd. declined as much as 1.5 percent and closed 1 percent lower at 78.70 rand in Johannesburg. The benchmark FTSE/JSE All Share Index (JALSH) rose 0.7 percent to 34,426.74, a new closing record.
The 162-member South African index has gained 11 percent over the past 12 months, outperforming a 4.3 percent decline in the value of the MSCI Emerging Markets Index. (MXEF) South Africa’s shares index trades for 12 times estimated earnings, compared with 11 times for the emerging-markets index.
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