Stock trading volumes dwindle before polls

Investors are reserving their judgment on South African stocks before Wednesday’s election, if trading volumes are anything to go by.

The number of shares changing hands on the Johannesburg bourse has dwindled to the lowest level seen this year, when measured on a monthly basis. The quiet trading suggests caution has taken hold before the polls measure support for the ruling African National Congress and President Cyril Ramaphosa’s efforts to improve economic management and fight corruption.

“We will need to see incentives for foreigners coming back to the market before volumes will sustainably pick up again,” said Casparus Treurnicht, a money manager at Cape Town-based Gryphon Asset Management. “These incentives are the same ones that local investors might use before rushing back.”

Read: SA assets signal rising anxiety as election nears

South Africa’s economy hasn’t grown more than 2% annually since 2013, while business confidence is at a two-year low. Foreigners have voted with their feet, selling a net $2.3 billion of South African equities this year, as of May 3, compared with inflows of $2.5 billion by that time in 2018. That’s helping to push down stock valuations.

Read: SA business confidence rises in April on post-election hopes

“Rightly so,” Treurnicht said in emailed comments. “I am not of the opinion that Ramaphosa will be able to do enough. Drastic measures are needed. No one has gone to jail for corruption and related offenses.”

Read: JSE set for a strong year but still offering good value

The volume of shares traded on the Johannesburg exchange has dropped for three months in a row for the first time since April 2016. The country’s benchmark stock index was 0.1% lower as of 12:27 pm Tuesday.