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COVER STORY | The inside view on JSE outflows

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The JSE in Sandton, Johannesburg.
The JSE in Sandton, Johannesburg.

When the CEO of South Africa’s major stock exchange, the JSE’s Leila Fourie, hit the headlines recently for saying outflows of foreign capital from the exchange kept her awake at night, many investors would have been left wondering how alarmed they should be and what action they should take. While the country’s structural issues are well-known and have been publicised for years, epitomised by our sovereign credit rating downgrade, Fourie’s comment was not contextualised. Immediate questions for retail investors would have included the timing of what was a seemingly worrying view. What implications do these outflows have for asset prices, liquidity and investor returns on the JSE?

Though the answers appear to be simple on the surface, the trends are nuanced and it pays to get inside the heads of industry professionals to find out how they view the JSE currently.

Galileo Capital executive director Warren Ingram says the long-term structural macro trend of foreign investors withdrawing from SA in all spheres will continue. “From the real estate market to bonds and equities, foreign investors continue to move money out of the country. Inside that is a cyclical pattern. In assets where things are currently going well, the withdrawal may slow down or even temporarily reverse, but the overwhelming trend remains the exit of capital.”

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