Security Dealing Activities in South Africa 2024

Challenges

Analyst coverage of listed companies, particularly small and mid-caps has declined. Delistings and the decline in the value of listed companies’ shares due to the slowing economy. Fraud is a major challenge particularly in cryptocurrency. Increasing risk of cyberattacks on exchanges. JSE trade volumes have fallen dramatically in recent months. Only a few local stockbrokerages are black-owned. Several multinational firms have closed or downscaled their local operations, leading to decreased competition in the sector. South Africa’s greylisting has affected capital raising and stockbrokers from signing on new clients. The performance of local exchanges has been affected by the poor local and global economic environment.

Introduction

The stockbroking industry is facing challenging times due to a decline in trade volumes and values on the JSE, due in part to the delistings trend and negative market sentiment. The value of shares traded declined in the first few months of 2024, following an almost 10% decline in 2023. The industry is experiencing consolidation, with the top 10 brokers on the JSE continuing to increase their share of trade value. Local markets have been affected by a series of crises, from loadshedding to poorly functioning rail and ports. However, several investors reported that they are bullish on South African equities.

Opportunities

Expanding to offer financial services alongside stockbroking services. Offering retail trading clients advice and training. Research on small and mid-caps listed on local exchanges. Selling cryptocurrency products. Selling sustainability-linked investment products. Selling trading products to more black clients. Using AI to create robo-advisors and to execute trades.

Outlook

Local stockbrokers are at a crossroads, where their numbers are likely to decline given waning investment sentiment, delistings, and declining trade volumes. As fees are squeezed, more brokers are likely to mix brokerage activities with asset management. An increase in retail products such as online platforms is expected. Investors indicated they were bullish on South African equities. Trade in cryptocurrency is growing, and several exchanges and investment companies are working with the financial industry to offer crypto assets to the public.

Trends

Advice and training to retail clients is growing in importance. AI is helping traders to place trades and to better assist clients. Cryptocurrency is gaining acceptance, but exchanges globally remain wary. Delistings continue apace. Increasing demand for sustainability-linked investment products. Interest in government bonds is growing. Investors are moving from active to passive investing. Retail investment is growing, driven by an increasing number smartphones and trading apps and online trading platforms. Social media has made investment analysis accessible. Stablecoins are growing in popularity to de-risk from bitcoin volatility. The number of stockbrokers is likely to decline as trading volumes on the JSE have declined significantly in 2023. The percentage of black investor clients of stockbrokers has increased substantially. There has recently been a significant net inflow into hedge funds.