The Ultimate Guide to
The South African Financial Market
As Africa’s largest stock exchange, the World Federation of Exchanges ranks JSE Limited as 19th among the largest stock exchanges in the world by market capitalisation. Well established companies that are not yet ready to list on the JSE’s main board can list on JSE’s AltX exchange instead.
The main stock index for the JSE is the FTSE/JSE Africa All Share Index. This headline index consists of 99% of all eligible equities listed on the JSE’s Main Board of the JSE. The broad All Share Index is further broken down into market capitalisation size categories as the Top 40, Mid Cap and Small Cap Indices.
After South Africa recently adopted an improved “Twin Peaks” regulatory system in 2017, financial market conduct regulation in South Africa for online forex and contract for difference (CFD) brokers has fallen under the auspices of the Financial Sector Conduct Authority (FSCA), which had replaced the Financial Services Board (FSB).
The FSCA operates outside the South African Reserve Bank (SARB), the country’s central bank, which also administers a prudential regulator called The Prudential Authority (PA) that is now responsible for regulating banks, insurance companies, financial cooperatives, financial conglomerates and some market infrastructures.
Forex traders may recognise the South African rand (ZAR) as South Africa’s national currency. The rand was ranked 20th by the Bank for International Settlements (BIS) among the most actively traded currencies in 2016, making up around 1.0 percent of the overall forex market’s daily turnover; slightly less than its 1.1 percent market share in 2013.
Trade factors that influence the South African financial markets include the price of key strategic commodities for the country, like oil and gold. Furthermore, South Africa’s exported goods and services account for 29.77% of South African Gross Domestic Product (GDP), according to the World Bank.
The country is therefore somewhat dependent on exports, particularly to China and the United States, making the country somewhat vulnerable to any ongoing trade disputes. For example, during 2018 the rand was one of the world’s worst-performing currencies against the dollar, but by the end of the year had begun showing signs of recovery based upon a reported thawing in the dispute between the two world superpowers.
Trading in South Africa
When looking for an online broker to trade forex or CFDs with, make sure to choose a well-regulated broker that has a strong reputation with clients, since they should be suitable for entrusting a margin deposit with them.
Online brokers generally offer several trading accounts for traders, including:
- Forex Trading: Exchanging one currency for another forms the basis of forex trading. Exchange rates fluctuate as one currency rises or falls relative to another in particular currency pair. The popularity of forex trading has expanded greatly once online trading became possible. The forex market is the most liquid and largest financial market globally and had a daily turnover of $5.1 trillion/day in April 2016, according to data compiled by the BIS.
- CFD Trading: Making transactions in derivative financial instruments known as contracts for difference (CFDs) allows traders to speculate on the future of their underlying assets. Such assets can consist of a currency pair, commodity, stock, stock index or other financial instruments.
- Demo accounts: Funded with virtual money, these accounts can be used to practice trading, test a strategy or check out a broker’s services and platform. Find out more on opening demo accounts here.
- Islamic accounts: These are suitable for traders who wish to trade in an account that conforms to Sharia law. Find out more on trading with an Islamic account.
With respect to trading stocks, the Johannesburg Stock Exchange provides trade executions in South African stocks, fixed income products and derivatives. Exchange transactions are largely executed in South African rand. To make a stock trade on the JSE, you will first need to open a trading account with a JSE-registered stockbroker who can then enter your orders into the exchange’s electronic trading and order entry system.
Opportunities of Trading in South Africa
South Africa has historically offered a rather attractive market for many businesses due to its relatively stable and well-established banking and financial system. For example, the country has benefited an increasingly mature level of infrastructure and local investment that comes from hosting Africa’s largest stock exchange.
Furthermore, according to the Schroders Global Investor Study investors remain rather positive on the South African stock market, while the FTSE/JSE Africa All Share Index is already trading well off its highs. In addition, South Africa offers a number of additional advantages for doing business in the following markets:
- Consulting and services related to transportation
- Various franchises
- Information technology consulting
- Electronic equipment
Furthermore, South Africa was ranked 23rd by the World Bank for protecting minority investors, 46th for paying taxes, and 66th for resolving insolvencies. That suggests a rather favourable environment for individual investors and traders to operate in.
Challenges of Trading in South Africa
In recent years South Africa has experienced a budget deficit problem and had to cut its growth forecasts in October 2018. This suggests that South Africa’s economic growth has the potential to suffer further from tariffs, trade wars and the failure of major trade agreements.
Another upcoming event that could present a challenge for South African markets is the general election later in 2019 in which voters will elect a new National Assembly and fresh provincial legislatures, as well as determining if current President Cyril Ramaphosa stays in office.
The South African Reserve Bank only rarely intervenes directly in the currency market to stabilise the USD/ZAR exchange rate, which has shown sharp drops and high volatility due to news-related shocks. The rand has also displayed notable trends over time and has been softening overall in recent years due to South Africa’s twin current account and budget deficits. Such currency valuation shifts can cause foreign exchange uncertainty for traders and businesses looking for a more stable environment to operate in.
When it comes to starting a business, the World Bank ranked South Africa a rather poor 134th. That organisation also gave the country an overall ease of doing business ranking of 82nd and a 73rd rank for obtaining credit. This indicates a relatively unfavourable environment for starting up or running a business, especially if it requires local financing.
Overall, individual traders may find South Africa a relatively favourable country to operate in due to its stable banking system and large stock exchange, although businesses may face more of a challenge. Furthermore, the country’s well-established “Twin Peaks” regulatory framework should additionally strengthen investor confidence in its financial system over time.
When searching for a broker to operate through in South Africa, traders should check to see that they offer a suitable range of asset classes, a decent trading platform, strong regulation and adequate financial security for a margin deposit.
Why Choose AvaTrade
For South Africa?
AvaTrade scored best in our review of the top brokers for south africa , which takes into account 120+ factors across eight categories. Here are some areas where AvaTrade scored highly in:
- 12 + years in business
- Offers 250 + instruments
- A range of platform inc. MT4, Mac, Mirror Trader, ZuluTrade, Web Trader, Tablet & Mobile apps
- 24/7 customer service
- Tight spreads from 0.70pips
- Used by 200,000 + traders.
- Offers demo account
- 4 languages
AvaTrade offers four ways to tradeForex, CFDs, Spread Betting, Social Trading . If you wanted to trade EURUSD
The two most important categories in our rating system are the cost of trading and the broker’s trust score. To calculate a broker’s trust score, we take into account a range of factors, including their regulation history, years in business, liquidity provider etc.
AvaTrade have a AAA trust score . This is largely down to them being regulated by Central Bank of Ireland, ASIC, IIROC, FSA, FSB, UAE and BVI, segregating client funds, being segregating client funds, being established for over 12
Trust Score comparison
A Comparison of AvaTrade vs. IG
Want to see how AvaTrade stacks up against IG? We’ve compared their spreads, features, and key information below.
Spread & fee comparsion
The spreads below are illustrative. For more accurate pricing information, click on the names of the brokers at the top of the table to open their websites in a new tab.
Comparison of account & trading features
|Platform||MT4, Mac, Mirror Trader, ZuluTrade, Web Trader, Tablet & Mobile apps||MT4, Mac, Web Trader, L2 Dealer, Tablet & Mobile apps|
|Services||Forex, CFDs, Spread Betting, Social Trading||Forex, CFDs, Spread Betting, Share dealing|
|Base currency options||USD, GBP, EUR, JPY, AUD||USD, GBP, EUR, CHF, JPY, SGD, AUD|
|Funding options||Payoneer, Credit cards, Bank transfer, PayPal, Neteller, WebMoney,||Payoneer, Credit cards, Bank transfer, PayPal, MasterCard, BPAY, DebitCard,|
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