Investors should not be alarmed by the JSE’s computer glitch that caused the bourse to hugely misrepresent foreign sellers of SA equities as net buyers of R98.10bn worth of local stocks from May to July 20.
That’s the message from Sasfin Securities’ deputy chairperson David Shapiro on Monday, who said that the real cash that flows will reflect in prices of shares, the rand and bond yields. “That’s already there,” he said.
Instead of foreigners investing a net R98.10bn in their South African portfolios in May, June and until July 20, the JSE said on Sunday foreigners were net sellers of an accumulative R36.4bn of SA equities in May and June and buyers of just R0.05bn in July to date.
However, Shapiro said investors should not be alarmed by this staggering misrepresentation. “Statistics don’t mean anything,” he said. “Lies, damned lies and statistics.”
Investors are playing the derivatives market on JSE – Shapiro
Explaining his scepticism, he said the JSE has become a gaming market, where most traders are playing the derivatives market.
“All the money they are tracking is irrelevant,” he said. “It’s all part of the futures market and derivatives.”
Shapiro said companies with the biggest market caps on the JSE like BHP Billiton, SABMiller, AB InBev, Richemont and Glencore all have primary listings in overseas markets and overshadow companies with primary listings on the JSE like Mr Price and Shoprite.
He believes arbitrage is to blame, which occurs when there is the simultaneous buying and selling of securities, currency, or commodities in different markets or in derivative forms in order to take advantage of differing prices for the same asset.
“There is a massive distortion,” he said. “Is there genuine investment from emerging markets? We don’t know.
“We don’t really understand the flows,” he said. “Even with the rand, there is so much trading and speculation, between 80% and 90% of these are speculative flows. Why try measure them?”
To get a more accurate picture of investment flows, he said the JSE should “take out the dual listed shares”.
He said the bond market could also have been distorted, but that should be further investigated.
Outflows are not a positive sign for struggling SA economy – Birkenstock
Overberg Asset Management director Brett Birkenstock said on Monday that the flows error is “an unexpected and abnormal error by the JSE, who usually are very reliable”.
“Due to the rand strengthening over the past period, it seemed personally feasible that there were foreign buyers on the JSE,” he said.
“With the correct data now being released and showing an outflow of foreign investment, this shows a continuation of disinvestment from South Africa, which is not a positive sign.
“That being said, with Brexit occurring during this period, one should not read too much into such statistics,” he said.
Birkenstock said he was more concerned about the SA Reserve Bank’s outlook for 0% GDP growth.
“This means, for the average person, that despite high inflation we are not seeing much needed growth, which will lead to job creation and in affect will see citizens getting poorer if the trend continues.”
JSE must explain move in more detail – NKC
NKC African Economics told Fin24 on Monday that the JSE should explain the mistake with more detail.
“It’s a great pity the JSE does not explain the mistake better, because it will tend to make stakeholders mistrustful of their systems in general, that they were able to make such a huge mistake,” it said.
“As for the figures – instead of the net purchases of R98bn we thought we’d seen in the three months since the beginning of May, it turns out the real figure is net sales of R36bn,” it said.
“This indicates that foreign portfolio investment was skittish about SA in May and June – this is in line with what you would expect, given that we are one of the more liquid emerging markets, so we tend to see portfolio outflows at times of global uncertainty.”