JSE Trading

Johannesburg stock exchange

 
The Johannesburg Stock Exchange, also commonly known as the JSE, is among the 20 global exchanges in the world, with a market cap of $1.11 trillion, as of March 2018. The JSE is located at 1 Exchange Square in Sandown, Sandton, Johannesburg, South Africa. It is the most important index from South Africa and the African continent as well. The listed companies that form the Johannesburg Stock Exchange (JSE index) are mainly South African based and the JSE shares are usually traded in South African Rand (ZAR), the country’s currency.

The Johannesburg Stock Exchange hosts five financial markets: equities and bonds, as well as financial, commodity and interest rate derivatives.

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Johannesburg Stock Exchange History

The Beginning and the First Years

The Johannesburg Stock Exchange was established in 1887 in Johannesburg, with the purpose of providing a platform for investors to take advantage of the first South African gold trading rush. During those times, trade was beginning to flourish, right after the precious metal was found in the Witwatersrand in 1886.

The remarkable discovery led to the establishment of mining and financial companies. Investors who were attracted to the promising riches were looking for a facility to gather and conduct their businesses. It didn’t take very long because, on the 8th of November 1987, Benjamin Minors Wollan founded the JSE, which corresponded to the investors’ needs. The Johannesburg Stock Exchange’s creation in the late 19th century means that it is the oldest exchange in the subcontinent.

The JSE flourished in the following years, aided by important investments in the gold industry and precious metals in general. For example, only foreigners, attracted by the very high-profit potential, had poured more than 100 million pounds in, until 1934.

Interestingly, the Johannesburg Stock Exchange had a rival in the name of the Union Exchange. The latter only lasted 25 years, from 1933 to 1958, when it was then closed, and all the companies listed were moved to the JSE index.

Important Moments in History

1947 is a milestone for the stock markets, as the first legislation on financial trading was passed. Sixteen years later, the JSE joined the World Federation of Exchanges, which was an international association of regulated markets all around the world.

In the early ’90s, the Johannesburg Stock Exchange moved to an electronic trading system and in 2005, it listed on its own exchange.

In 2003, the JSE came up with an alternative exchange, called AltX. This was dedicated to the small and the medium-sized listings. The Yield X soon followed which was an exchange for interest rate and currency trading instruments. By the end of 2009, the group made two important acquisitions: The South African Futures Exchange (SAFEX) and the Bond Exchange of South Africa (BESA) in 2009.

The Fascinating Story of Johannesburg Stock Exchange’s Six Homes

From its foundation in 1887, the Johannesburg Stock Exchange had no less than 6 headquarters. Every single time, these locations and their surroundings have become famous in the financial world. Important banks and institutions had to move as close to the financial headquarters as possible to conduct their business. It is safe to say that the Johannesburg Stock Exchange, built in the City of Gold, left a legacy similar to Wall Street in the U.S.

  • First Home

The first JSE building was located at the intersection between Simmonds and Commissioner Streets. Soon, it became a true hub of the mining camp nearby. People from all over the world were coming there to try and profit from the largest gold place on the entire earth. It was during those times when the most prestigious mining companies, that created the industry as we know it now, were establishing their famous businesses in the area, at the first open area exchange in South Africa.

  • The 2nd Home

Only 3 years after the inauguration of the first Johannesburg Stock Exchange house, the second home was completed, and the Exchange moved in. This was the consequence of the extraordinary growth of the mining town. Its highlight was the large trading hall, but also the facade. Interestingly, the eastern part of the building was completed in 1893, because of the harsh economic conditions in Johannesburg. With the second building ready and functioning, the financial district around it grew even stronger, a trend that continued every single time the JSE changed headquarters.

  • The 3rd Home

1904 was the year the Johannesburg Stock Exchange found a new centre. This time, the Exchange was moved to a new site: Hollard Street. The reason? As usual: the need for a larger, more modern space.  The new building massed 210 offices and an extremely large main hall. For the next half of a century, this was the “Wall Street of Johannesburg”.

  • The 4th Home

After the demolishing of the third stock exchange in 1958, it took only a mere three years for the fourth one to be ready. This was built on the same site and it was considerably more imposing than its predecessor: nine floors, exhibition hall, dining room for the committee, cinema projection room and large, cosy office spaces were all available in the new Exchange. Still, it only lasted for 17 years as the JSE’s headquarters.

  • The 5th Home

17 Diagonal Street is the location of the following stock exchange. It opened in 1979 and, although people at that time had projected that it will be the home of the JSE for more than 50 years, it lasted for about 20 years. The trading hall still functions though, and it serves as a location for some financial activities and events.

  • Current Home

From 2000, the Johannesburg Stock Exchange is situated at Exchange Square on Gwent Lane, Sandton.  It is an area surrounded by corporate headquarters, banks and plenty of financial institutions, in the good old tradition of the JSE.

JSE Index Composition

The Johannesburg Stock Exchange is the oldest existing and largest stock exchange in Africa. As of 2003, it had an approximate 472 listed companies. Although the numbers have fallen in recent years, the market capitalization has grown.

⭐The FTSE/JSE Africa All Shares Index

The most important component of the JSE Index is the FTSE/JSE Africa All Shares Index. This is a market capitalization weighted index and the companies included in it make up the top of the market cap of all listed companies on the JSE.

⭐The Top 40 Index

On the local side, the JSE combined with FTSE and created the JTSE/FTSE indices. Among these, the largest and most important one is the Top 40 index, which is comprised of the 40 biggest companies on the Johannesburg Stock Exchange. The average return of these companies’ stocks, based on the general performance, is published regularly and it is updated in JSE real time during the course of the trading hours. In other words, the JSE’s real-time performance is available for all traders to check whenever they want to.

⭐Other JSE Indices

The Johannesburg Stock Exchange includes some sub-indices: Small Cap, Mid-Cap, Indi25 (which measures the performance of the 25 largest industrial stocks), Fini15 (the performance of the 15 largest financial stocks) or Resi 10 (resource stocks).

Top 10 Companies Represented by the FTSE/JSE Top 40 Index and Their Index Weighting (%)
Companies Index Weighting (%)
Naspers (Media) 21.94%
Compagnie Financiere Richemont AG (Personal Goods) 10.50%
BHP Billiton (Mining) 10.33%
Sasol (Chemicals) 4.97%
Anglo American (Mining) 4.62%
Standard Bank Group (Banks) 3.75%
Firstrand Limited (Banks) 3.54%
British American Tobacco PLC (Tobacco) 2.84%
MTN Group (Mobile Telecommunications) 2.52%
Mondi PLC (Forestry & Paper) 2.37%

Factors that Influence the Overall Index Price

It is well-known that markets react in a variety of ways to a number of factors, such as political climate, regulatory decisions or rumours of war. The JSE index and the JSE shares make no exceptions.

The Domestic Factors and the Global Factors

The domestic factors, which are influenced by the country’s politics, and the global factors are the most important things to look for before establishing whether it’s a good time or not to either buy or sell JSE shares, or to trade on the JSE index itself. What one should know, as a general rule, is that share prices are generally higher when a country’s economy is performing better, and they are generally lower when the country’s economy is performing poorly.

Another thing to look out for is the interest rate. This plays a key role in determining stock market trends and particularly when looking at the JSE real-time quotes. The upward market trend (bullish market) usually starts when the interest rates are low, while the downward market trend (bearish market) is often correlated with higher interest rates.

The performance of companies that are listed in the Johannesburg Stock Exchange is a major influence of the overall index price. As long as these companies are performing well, investors may pour more money in, making JSE shares generally higher in demand. On the other hand, if the companies perform poorly, investors might sell their shares. Depending on the volume of sold shares, the prices may fall rapidly as the markets become flooded with these shares.

Finally, political factors also take a toll on the JSE index. Political factors usually have the highest impact, because they tend to affect all businesses, irrespective of the sector. Traders should be aware of the political factors and events that are happening in the country and assess how these events are impacting the index’s price. The general perception could affect the JSE share prices, as well as the JSE index.

JSE Index Trading information

  • The JSE opens at 9:00am and stays open all day until the closing bell at 5:00pm (GMT+2)
  • The JSE price moves in increments of 0.25
  • The margin requirement for trading the JSE is usually about 0.5% (That is a good leverage)
  • The minimum trade size is 1 unit
  • The currency of the JSE is the South Africa Rand (ZAR)

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