What moves the JSE?

2013-08-18 14:00

Explaining why the JSE all share index hit a record of 43?000 points this week is no easy thing.

It certainly shows little concern for who is governing the country or much else happening within the borders.

Dawie Roodt, chief economist for the Efficient Group, says: “Simply put, there are two worlds. One is the real world where we live and work. The other is the monetary world, including the JSE, which does not necessarily have any relation to the real one.”

The JSE’s recent run is largely attributed to foreign news, including good economic news from China.

The weak rand also helps since it makes local shares cheaper for foreigners. Since its low point in 2008, the JSE’s main index has doubled in value.

Although few people invest on the exchange directly, any number of people are affected through pension funds.

According to Johan Rossouw of Vunani Securities, there was a net inflow of money on to the JSE between Monday and Wednesday of some R1.9?billion.

Mike Schüssler, an economist at Economists.co.za, says the JSE is not where you’ll find insights into the health of the economy.

“You should look at unemployment, the growth rate, inflation and the exchange rate. For the unemployed, this run on the JSE means nothing.

“Most of the money invested by South African firms is invested outside the country anyway.”

What the markets do care about is formal policy decisions and the pronouncements of SA Reserve Bank Governor Gill Marcus.

But even “bad” economic policies are not enough to scare off investors if the possible returns justify the risk, says Rossouw.

Does the president move the JSE?

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