I have written about this before and not being someone who is into stocks and shares these days I find it quite fascinating how companies just seem to disappear. There are justifiable reasons behind it like over regulation which is a killer to most forms of business even for the bigger companies. The Johannesburg Stock exchange is SA's equivalent to the FTSE and it is rather small in comparison. Actually you cannot compare the two as that would just be stupid as they are not in the same league. The JSE is listed as the 17th largest stock exchange in the world and the largest in Africa.
I had some shares back in the 1990s and sold them when I returned to the UK in 1994. Back then there was 850 companies listed on the JSE and now they have 300 so in the last 30 years 550 companies have delisted and moved on. The decline has not stopped and more companies delist than list each year.
What is another major problem is the top companies are listed on the exchanges in London and New York so the amount of liquid shares available on the JSE are very much diluted. This allows these companies to access cheaper finance abroad and thus reduces or limits the shares available to the local markets. For a local investor the number of investments are limited and why many seek international outside investments.
Just 5 companies account for half of the JSE value and the top 20 account for 83% of the total value. The remaining 280 listed companies account for 17% and when it comes to trading on a daily basis the top 40 companies account for more than 90% of the trades. The smaller companies only account for 2% of the daily trades so the majority of companies see very little daily action.
This is a problem for large fund managers as one or two trades can pump the prices and make it harder to exit so they tend to avoid them all together as the risk is just too high.
The reason behind all the delisting's is down to over regulation which is meant to protect investors, but at the same time makes investing much harder and not good for business in general.
The two articles I was reading on this problem never mentioned the obvious and that is crypto. If you do not have a selection of investments and are limited in your choices surely you are going to look elsewhere. Crypto is an obvious area for growth and you can bypass the JSE because there is no crypto ETF's available or have even been mentioned as yet.
Just think you are a portfolio manager and you can only invest in 5 or 10 companies which is exactly what every other portfolio manager is doing and you are all making the same type of returns. Being able to outperform the market would be impossible to due the limited opportunities and if you tried to do something different there is too much risk.
SA has a few crypto exchanges which I do not use them for obvious reasons plus they also do not have the selections available. Besides BTC and ETH there will only be a handful of others like XRP, Sol and maybe Dodge so you would have to go off shore for a bigger selection spreading the risk with a larger portfolio which would allow you to beat the local market.
