JSE hit by poor market sentiment


JSE hit by poor market sentiment

Published Date: 2019-06-25 | Source: Stephen Gunnion | Author: Stephen Gunnion

JSE hit by poor market sentiment

The stock-exchange operator says the difficult economic environment in SA has impacted investor appetite.

JSE Limited has warned of a steep drop in full-year profit due to a decline in trading activity and a reduction in what it charges clients as it faces increasing competition.

In a trading statement, the stock-exchange operator said earnings and headline earnings per share for the year to end-June would be between 25% and 35% lower than last year. It said its earnings were affected by a number of factors including lower value traded in the equities market, which saw more than R28 billion in net foreign sales and muted local investor activity in the first half of its financial year. That translated into lower revenues, particularly off the high base that was set in the first half of the previous year.

Earnings were also affected after the JSE introduced a new tiered billing model for equities trading last August, reducing the cost of trading for its clients to make it more competitive. A number of new stock exchanges have launched over the past couple of years, promising more efficient settlement systems and lower fees. These include A2X, ZAR X, 4 Africa Exchange and Equity Express Securities Exchange. They don't all compete directly with the JSE however, with A2X offering secondary listings and Equity Express aimed specifically at black empowerment schemes.

The exchange's 2018 numbers were also boosted by a R31 million income tax credit, which wasn't repeated in the current year. Added to that, it has been filling vacancies so it can deliver on its strategic initiatives, adding to its costs. It said its cash and capital position remained healthy.

Apart from the tiered billing model for the Cash Equities Market, it launched the pilot phase of a new electronic trading platform for government bonds last year. And it's upgrading its trading and clearing technology in its equity derivatives and currency markets, which it says will help reduce the cost of transacting in these markets over time.

Its shares fell 9.6% to R133.92 yesterday.

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