Companies on Johannesburg’s Alternative Stock Exchange (AltX), a division of the JSE Ltd (www.jse.co.za), continue to struggle to attract sufficient mainstream attention. However, at a recent conference, one fund manager told them to concentrate on running their companies well and not to watch the share price continuously.
According to a report in Business Day (www.businessday.co.za) newspaper, investor activity has been low on AltX, which was established in 2005 for small and medium-sized companies that do not necessarily meet the requirements of the JSE main board.
Problems had occurred with unregulated instruments such as contracts for difference (CFDs a contract between a trader and provider to exchange the difference between opening and closing price of the investment they are written on, including index, share or commodity) and single stock futures (SSFs – futures contracts written on a particular share, usually in batches of 100). CFDs are popular because they allow companies with smaller market capitalisation to trade higher volumes than traditional trading, while using less capital. In both cases trading occurs on speculated price movement, not the purchase of the nominated instrument.
Senior GM of the JSE, Noah Greenhill, said both highly geared futures were no longer tradable on the AltX.
Stanlib chief economist Kevin Lings said many investors had focused on companies with a long record of stability and liquidity during SA’s recent “great recession” and avoided “smaller companies”. Alphen Asset Fund manager Phillip Wörz said too many CEOs were overly concerned about their share prices: “Too many bosses are watching their Reuters wristwatches at meetings. They should focus on running their businesses well, and we’ll take care of the share price.”
The manager of primary markets at the London Stock Exchange (www.londonstockexchange.com), Richard Webster-Smith, explained how London’s Alternative Investment Market (AIM) had gained “a strong reputation” among institutional investors. Institutional investors (70%) had focused on the fundamental qualities of companies, while retail investors (30%) had responded to emotion, he said. JSE business development manager Lauren Czepek says AltX has 40% institutional and 60% retail investors, including management shares.
Webster-Smith said nominated advisers (NOMADS) had done well in monitoring UK corporate governance standards for AIM companies. Some AltX companies felt designated advisers – SA’s version of NOMADS – needed to be more strictly punished for any actions not in the interests of good corporate governance.