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The JSE is near record highs – while the economy crashes and burns

19 March 2021 11:32 AM

The JSE is near record levels; what are investors smoking? Personal finance advisor Warren Ingram explains the disconnect.

The South African economy is old, mouldy toast.

It shrank by 7% in 2020 – its worst showing on record – yet the Johannesburg Stock Exchange (JSE) is up 58% year-on-year (12 March 2020 to 12 March 2021).

The performance of the JSE is not strongly correlated with the SA economy, as most of the Top-40 companies make the bulk of their earnings abroad.

© piren/123rf.com

Some of the country’s smaller companies are very reliant on the domestic economy, but they make up a tiny portion of the overall value of the JSE.

The Money Show’s Bruce Whitfield asked personal financial advisor Warren Ingram (Galileo Capital) to explain.

There is economic devastation, increasing unemployment and people taking pay cuts…

Warren Ingram, Personal Financial Advisor - Galileo Capital

The top-four shares on the JSE account for 52% of the value of the entire stock market. Naspers accounts for 20%... BHP is just over 12.5%. Richemont is just over 10% while Anglo is also just over 10%...

Warren Ingram, Personal Financial Advisor - Galileo Capital

The largest business [that earns a significant share of its income in South Africa] is FirstRand; it makes up only 3.5% of the JSE. The bulk of the Top-10 earns a huge chunk of their money outside of South Africa…

Warren Ingram, Personal Financial Advisor - Galileo Capital

We’re seeing an element of Darwin at work. Survival of the fittest… The remaining businesses have trimmed excess fat… As the bad news ends, life becomes much easier for them… We’ve got superfit companies that have only known tough times, and suddenly there’s no headwind…

Warren Ingram, Personal Financial Advisor - Galileo Capital

Listen to the interview in the audio below.




19 March 2021 11:32 AM

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