JSE draws net positive foreign inflows as Moscow wanes

The Johannesburg Stock Exchange (JSE), Africa’s biggest bourse, has seen net positive foreign inflows for the first time in three and a half years, data shows, as emerging market investors shifted funds from Moscow.

Accounting scandals in top companies, anaemic domestic growth, regulatory concerns and corruption allegations against the government combined to make foreign investors wary of the Johannesburg bourse.

They remained net sellers even though the benchmark index on the JSE .JALSH gave a return of 4% and 24% respectively over the last two years.

The net selling trend reversed in mid-February as concern Russia would invade Ukraine mounted, JSE data shows.

As another resource-rich nation, likely to benefit from high commodity prices, South Africa is a logical alternative and in February alone, the JSE saw R15 billion ($991.11 million) and R17 billion of net foreign capital flowing into equity and debt markets respectively.

Foreign inflow were last net positive in August 2018.

JSE CEO Leila Fourie said she expected the displacement from Russia to continue to benefit South Africa “as major indices take steps to exclude Russian exposures, particularly in the EEMEA (emerging market) indices wherein South Africa’s weight is larger”.

The inflows will increase liquidity, and could lift company valuations on the JSE, reducing the discount at which several major South African companies trade compared with the value of their underlying assets, Fourie said.

Once viewed as the continent’s centre of capital-raising and listings, Johannesburg has gradually lost prominence.

Around 25 companies de-listed in 2021, a quarter more than the previous year, and the bourse has seen few initial public offerings compared to a flood of IPOs in other emerging markets.

David Shapiro, deputy chairman of Sasfin Securities, said volumes traded on the JSE have doubled over the last week, which could not be explained by local investment alone.

“If you eliminate Russia, you need to put your money somewhere… South Africa being a resource nation, automatically money gets diverted here,” he said.