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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 ANC 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.”
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.
“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.”
The volume of shares traded on the Johannesburg exchange has dropped for three months in a row for the first time since April 2016.
Find everything you need to know about the 2019 National and Provincial Government Elections at our News24 Elections site, including the latest news and detailed, interactive maps for how South Africa has voted over the past 3 elections. Make sure your News24 app is updated to access all our elections coverage in one place.
