12 January 2006
2005 was a record-beating year for South Africa’s JSE, with foreigners buying a record net R50-billion worth of local shares, the All Share index rocketing 43% – reaching countless record highs in the process – and the JSE’s market capitalisation increasing by 40% over 2004.
According to Business Day, foreign investment in South African stocks reached a 10-year high in 2005 on the back of soaring gold, platinum and copper prices. Net stock purchases by foreigners more than doubled from R32.9-billion in 2004 to R50.5-billion in 2005.
Economist Mike Schussler told Business Day that the increase in foreign investments would yield long-term economic benefits for South Africa.
“The capital inflow will help with economic development and job creation. In addition, this investment will keep the rand and inflation stable. With stable inflation, interest rates can stay down,” Schussler said.
“This is an encouraging development for SA because people who make these investment decisions base them on their assessment of the country and government’s economic policies.”
One of the world’s top performers
According to Reuters, the resource-heavy South African bourse was one of world’s best performing stock markets in 2005, thanks to high commodity and precious metal prices and strong earnings from industrial stocks, which were boosted by buoyant consumer demand.
The JSE’s All Share index rose by 43% during 2005, following a 20% rise in 2004, placing ninth in the six months to 5 January on Bloomberg’s list of 78 primary equity indices worldwide.
The Financial Mail quotes Standard & Poor’s as reporting that the 46.6% total return on the JSE in 2005 was the best among six large emerging markets – beating Mexico (41.3%), India (41.2%), Brazil (37.2%), Taiwan (11.3%) and China (11.3%) – with only one market among developed economies, namely Japan (47.4%), doing better.
According to Moneyweb, the JSE’s Resource 20 index was the exchange’s best performer with a return of 67%, with other indices all delivering good growth: Gold Mining 61%, Small Caps 42%, Mid Caps 35%, Industrial 25 32%, and Financial 15 30%.
Moneyweb reports that the total market value of all shares listed on the JSE was R3.6-trillion on 30 December 2005 – up 40% on the JSE’s market capitalisation of R2.6-trillion at the end of 2004.
According to Business Report, the JSE pulled in 19 new listings in 2005, and has more than 10 new listings already in the pipeline for 2006, while AltX, the JSE’s alternative exchange for small and medium-sized companies, is expected to double in size this year.
The exchange started 2006 where it left off last year, reaching yet another record high on the first trading day of the new year.
On 9 January, the gold price reached a 25-year record of US$544.60 an ounce – its highest level since January 1981 – adding to an overall “feel good” factor that has gripped South Africa’s economy.