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Blog : 18 December 2016 (Foreign traders as percentage of total trades on JSE)
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In today's blog we take a look at the impact foreign buyers/traders has on the JSE. Just what percentage of trade can be attiributed to traders outside of South Africa. We take a look at foreign traders participation on the JSE. Ever noticed how quiet the market seems to be when there is a public holiday in the USA, UK or rest of Europe. Well its not your imagination. Foreign traders makes up a big deal of trade on the JSE.
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Foreign traders contribution to total trade on the JSE
The bar chart below shows the value of total trade in equities on the JSE per month versus the total value of trade in equities by foreigners. From the bar chart it is pretty clear that foreign traders makes up a sizeable chunk of trade that takes place on South Africa's JSE.
Based on the statistics for January 2016 to November 2016, on average 36.6% of trade value is made up by foreigners. Thats more than a third of all trade value that takes place on the JSE, that belongs to foreign buying and selling. In the calculation of the value of total trade by foreigners the value of shares sold and shares bought were added to get to total value traded by foreigners.
The graphic below shows the purchase and sale of shares per month by foreigners. It also plots the net sales/purchase of shares. Where a negative indicates foreigners sold more shares (in value) than what they bought. A positive indicates that they bought more (in value) than what they sold.
The sad story this bar chart shows is the fact that for not one single month of 2016 so far, has foreigners bought more shares than sold on the JSE. A clear indication of foreign investor sentiment not only towards companies listed on the JSE, but the South African economy and its future growth prospects.
Foreigners have sold R119.9billion more in shares in 2016 than what they bought. To put the value in persective the net sale of shares on the JSe by foreigners equates to roughly 3.95% of to total value of South Africa's economy. That is a sizeable chunk. So if South Africa's Reserve Bank ever harboured any ideas of stepping into the currency market and buy Rands to boost demand and protect a depreciating currency, they should think again, as this is where the big boys play. We do not think South Africa's central bank will ever be able to directly influence South Africa's currency by buying up currency to boost demand and hold up the price.
If foreigners are net sellers of a very liquid asset such as shares to the tune of R119.9billion, just imagine what kind of money foreign companies are witholding from investing in South Africa in fixed assets. If they dont want to hold liquid assets here, why on earth would they want to invest in fixed assets here? And this is part of South Africa's economic problem. It needs far greater Foreign Direct Investment (FDI). And in SA it has run dry, just like many of SA's dams due to the drought. Seems South Africa's fixed investment space has suffered a long drought too.
Foreigners have sold R119.9billion more in shares in 2016 than what they bought. To put the value in persective the net sale of shares on the JSe by foreigners equates to roughly 3.95% of to total value of South Africa's economy. That is a sizeable chunk. So if South Africa's Reserve Bank ever harboured any ideas of stepping into the currency market and buy Rands to boost demand and protect a depreciating currency, they should think again, as this is where the big boys play. We do not think South Africa's central bank will ever be able to directly influence South Africa's currency by buying up currency to boost demand and hold up the price.
If foreigners are net sellers of a very liquid asset such as shares to the tune of R119.9billion, just imagine what kind of money foreign companies are witholding from investing in South Africa in fixed assets. If they dont want to hold liquid assets here, why on earth would they want to invest in fixed assets here? And this is part of South Africa's economic problem. It needs far greater Foreign Direct Investment (FDI). And in SA it has run dry, just like many of SA's dams due to the drought. Seems South Africa's fixed investment space has suffered a long drought too.