STOCK MARKET IN SOUTH AFRICA

Stock Market in South Africa



Stock Market in South Africa

African stock exchanges are currently in their infant stages, but they should not give up. After all, both New York and the London Stock Exchanges took centuries to develop. This paper discusses stock market in South Africa in a concise and comprehensive way.

1- How has the Stock market in South Africa done Over the Last Five Years?

Companies raise their long-term finance through the issue of shares and loan stocks to members of the public and to institutional investors. The stock markets are therefore vital to firms wishing to raise long-term finance. Moreover, the stock markets offer the opportunity for equity (shares) or debt (loan stocks) holders to transfer their holdings from one investor to another.

Africa is a latecomer to the stock markets, but by 1995 there were stock markets in Botswana, Egypt, Ghana, Cote d'Ivoire, Kenya, Malawi, Mauritius, Morocco, Namibia, Nigeria, South Africa, Sudan, Swaziland, Tunisia, Zambia and Zimbabwe.

Egypt had the largest number of quoted companies (718) by 1995, whilst Zambia had the lowest number (18). But the world's best performing stock market in 1995 was Cote d'Ivoire where the market price index rose by 140%.

The stock market is widely seen as an engine for economic growth. By channelling funds into African companies, stock markets can increase the volume of investment earmarked for harnessing the continent's economic potential.

A potential investor will not generally be prepared to take up issues of shares or loan stocks, unless the opportunity exists to liquidate his investments at any time. This investor will also be interested in whether his investment is efficiently priced. Market efficiency in the context of pricing implies that, at all times, all available information about a firm's prospects is fully and rationally reflected in that firm's security prices.

2- How ...