Stock Trading Volumes in South Africa Dwindle Before Polls

(Bloomberg) -- Investors are reserving their judgment on South African stocks before Wednesday's election, if trading volumes are anything to go by.

The number of shares changing hands on the Johannesburg bourse has dwindled to the lowest level seen this year, when measured on a monthly basis. The quiet trading suggests caution has taken hold before the polls measure support for the ruling African National Congress and President Cyril Ramaphosa's efforts to improve economic management and fight corruption.

“We will need to see incentives for foreigners coming back to the market before volumes will sustainably pick up again,” said Casparus Treurnicht, a money manager at Cape Town-based Gryphon Asset Management Ltd. “These incentives are the same ones that local investors might use before rushing back.”

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South Africa's economy hasn't grown more than 2 percent annually since 2013, while business confidence is at a two-year low. Foreigners have voted with their feet, selling a net $2.3 billion of South African equities this year, as of May 3, compared with inflows of $2.5 billion by that time in 2018. That's helping to push down stock valuations.

“Rightly so,” Treurnicht said in emailed comments. “I am not of the opinion that Ramaphosa will be able to do enough. Drastic measures are needed. No one has gone to jail for corruption and related offenses.”

The volume of shares traded on the Johannesburg exchange has dropped for three months in a row for the first time since April 2016. The country's benchmark stock index was 0.6 percent lower as of 3:01 p.m. Tuesday.

To contact the reporters on this story: Adelaide Changole in Nairobi at achangole2@bloomberg.net;Colleen Goko in Johannesburg at cgoko2@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen, Phil Serafino

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