JSE’s response to Minister’s Budget announcement on prudential regulation

The Johannesburg Stock Exchange (JSE) is pleased to note today’s announcement of Treasury’s move to finalise the prudential regulatory framework for the regulation of foreign exposure for institutional investors. The announcement was part of today’s Budget speech given in Parliament by Finance Minister Pravin Gordhan.

While Treasury has indicated that it intends to consult on the complex issue of how best to define foreign and local assets for the purposes of prudential regulation, the JSE welcomes the confirmation in today’s Budget speech that any change in the classification of foreign companies listed on the JSE will be forward looking only and will not affect the current status of foreign companies listed on the JSE. This ends speculation about the classification of the existing dual listed companies (known as the “London Five”), which include some of the largest companies listed on the JSE. These will continue to be treated as domestic companies despite their foreign domicile. During 2010, trade in five of these companies – including Anglo American, BHP Billiton, SAB Miller, Old Mutual and Investec – made up 9% of all shares traded, 11% of the total number of trades and 24% of all value traded on the JSE.

National Treasury’s classification of listed companies – as domestic or foreign inward listings – is important as it determines the manner in which South African investors, particularly institutions, are able to invest in listed companies.

“The JSE has had detailed conversations with National Treasury about this topic over the years. The exchange supports Treasury’s gradual relaxation of exchange controls and recognises the significant steps taken in this regard over the past number of years. We are pleased that the ‘London Five’ will continue to be treated as domestic listings,” says JSE CEO Russell Loubser.

“Once we have reviewed Treasury’s discussion document, the JSE looks forward to engaging with National Treasury on the most appropriate way to classify other foreign companies with listings on the JSE,” says Loubser. “It is important that finality is reached, so that South Africa is able to attract more foreign listings into South Africa so that South Africans can use South African infrastructure to diversify their investment portfolios and so that the country can play a meaningful role as a gateway for investment into African markets.”