Written by Rajesh Jhamb, founder, OutreachFunnel on behalf of Admiral Markets.
Have you considered investing in some of the largest companies on the Johannesburg stock exchange?
You’ll find South Africa’s forty largest listed companies on the JSE Top 40 index. These companies make up 80 percent of the total stock market value.
The index is weighted according to the market capitalisation value of the top 40 companies. The performance of the largest companies will, therefore weigh more heavily on the overall index performance.
In fact, the top ten companies account for nearly 60 percent of the value of the JSE Top 40 with Richemont and Anglo American taking nearly 30 percent of that share. This data and more others allow trades to invest in JSE Top 40 index.
JSE Top 40 Performance
The performance of the JSE Top 40 index has been excellent in the ten years leading to the December 2021 despite taking a major knock during the pandemic. It gained 136 percent over the decade, excluded dividend payments.
The JSE increased by a staggering 95 percent from the its Covid low in March 2020 to the end of December 2021. In 2022, the JSE followed other global exchanges downwards. Still in many ways South Africa has recovered faster than its global peers with the JSE performing better than other emerging market shares.
The stock exchange will recover from the current decline which resulted from global inflationary pressures and the war in the Ukraine.
How to Invest on the JSE Top 40 Index
There are several ways to invest in the JSE top 40.
Exchange Traded Funds (ETFs) are relatively inexpensive and offer flexibility and diversification. Mutual funds track the JSE Top 40 index covering all of the listed companies listed. Mutual funds are a bit more expensive to trade, but they’re one of the best options for long term trading.
Many investors choose a number of the top companies on the index and then buy individual shares.
Contracts for Difference CFDs may be the best option for short term investments though they are riskier than ETFs. With these financial derivatives, traders earn money on share price differences over agreed short term periods
Tips for Trading on the JSE
The most successful traders take the time to understand the factors that affect share price. This helps them to make informed decisions about when to buy and sell.
Keep an eye on related indices when trading on the JSE. Movements on major international stock exchanges like the Dow Jones Industrial Average and the S&P 500 often give a good indication on the direction that the shares on the JSE will take.
The US markets remain open long after the JSE has closed. Price movements on these or the Asian markets that open earlier may give an indication of the direction that share prices may take.
The exchange rate also affects the JSE share price. Many of the larger companies have foreign assets. If the rand weakens against the dollar, these companies will repatriate more rands than if the currency strengthens.
More than 65 percent of the shares on the JSE earn their funds in foreign currency. The shares earning foreign funds are known as rand hedge counters.
Key economic data, including the Gross Domestic Product GDP, the Balance of Trade and the Consumer Price Index CPI, all affect share performance. Likewise, financial news such as the publication of financial reports of the companies on the index will affect sentiment and impact the share price.
Invest in Africa’s largest stock market
The largest stock market in Africa, the Johannesburg Stock Exchange JSE came into existence in 1887. In 1996 it transitioned from floor-based trading to online systems, allowing people access to remote trading.
The JSE continues to develop new investment vehicles, remaining relevant and technologically in tune with investors. The exchange continues to perform well, offering investors the opportunity to grow their funds with diversified and flexible financial products.
[Image – Photo by Yiorgos Ntrahas on Unsplash]
