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WORKINGS OF THE JSE 7 February 2009 Waldemar Budeli Copyright© JSE Limited 2005 www. WORKINGS OF THE JSE 7 February 2009 Waldemar Budeli Copyright© JSE Limited 2005 www. jse. co. za

WHAT IS THE JSE What is not JSE: - Not a bank or an WHAT IS THE JSE What is not JSE: - Not a bank or an insurance house - Not a gambling resort/ pyramid scheme - Not a get rich quick scheme - Not big brother to listed companies - Not Government Agency - Not Rich & Famous Club What we are: - A market where shares bought and sold - Place where primary capital is raised by listed companies - A company owned by its shareholders © 2

HISTORY OF THE JSE Founded in November 1887 Trading between the chains Open outcry HISTORY OF THE JSE Founded in November 1887 Trading between the chains Open outcry (market floor) trading ended in June 1996 Relocated to Sandton in 2000 Demutualised on 1 July 2005 Owned by shareholders Listed on 5 June 2006 © 3

REGULATORY FRAMEWORK SARB: Banking Financial Services Sector Banks Building Societies FSB: Non Banking Financial REGULATORY FRAMEWORK SARB: Banking Financial Services Sector Banks Building Societies FSB: Non Banking Financial Services Sector Capital Markets Insurance Houses Retirement Funds Collective Investment Schemes Friendly Societies © 4

JSE & ECONOMIC SYSTEM Companies in search of primary capital issues shares through the JSE & ECONOMIC SYSTEM Companies in search of primary capital issues shares through the market The market is the place where shares traded (capital raising and as investment) and other financial securities are bought and sold Gather the savings of the nation by bringing potential buyers & sellers together Pass the capital on efficiently and securely to the users Employment opportunities Wealth creation © 5

FUNCTIONS OF THE EXCHANGE Company allots shares to the public to raise capital and FUNCTIONS OF THE EXCHANGE Company allots shares to the public to raise capital and the proceeds of the sale are used by the company to establish or expand its business The provision of an orderly market to facilitate the secondary trade of listed securities between buyers and sellers, in terms of Rules and Regulations of the JSE, with due protection for all parties concerned. © 6

WHAT ARE SHARES • Shares represent ownership in a company • Holding a company’s WHAT ARE SHARES • Shares represent ownership in a company • Holding a company’s shares means you are one of the many owners (share holders) • If a company does well (profitability), then the share price could potentially rise and some companies may choose to pay dividends • Likewise if a company is not doing well (losses) then its share price could potentially fall, and it might not be able to declare a dividend (situations differ from company to company) © 7

Benefits of investing in shares Capital Income (dividends) Capital Growth ( the difference between Benefits of investing in shares Capital Income (dividends) Capital Growth ( the difference between price paid and the selling price) Right to attend meetings and vote Right receive company information (financial statements, etc) © 8

INVESTING IN SHARES First and foremost : It is very Important to understand the INVESTING IN SHARES First and foremost : It is very Important to understand the difference between LISTED and UNLISTED SHARES Listed shares are trading on the JSE Unlisted shares are issued and trade outside the market Investing in shares is about creating wealth or growing your savings (capital growth and capital income) © 9

METHOD OF TRADING Prior March 1996 - Market floor June 1996 – Johannesburg Equities METHOD OF TRADING Prior March 1996 - Market floor June 1996 – Johannesburg Equities Trading (JET) System –an automated Trading Extremely reliable & providing optimal investor protection Efficiency and equal participation of all players (large and small) Dual Trading (Agent or Principal) May 2002 – JET system changed to JSE SETS System Functional Segments & Sections In April 2007 – Trad. Elect replaced SETS system © 10

JSE MARKETS & PRODUCTS Equities – Shares, ETF’, Financial Derivatives – SSF, Warrants Agricultural JSE MARKETS & PRODUCTS Equities – Shares, ETF’, Financial Derivatives – SSF, Warrants Agricultural Derivatives – Yellow Maize, Soya, Beans Yield-X – linked to interest rate bearing instruments © 11

LISTING CATEGORIES Main Board Development Capital Market (DCM) – 1984 This board is closed LISTING CATEGORIES Main Board Development Capital Market (DCM) – 1984 This board is closed to new companies since 2003, however in share price pages this board is shown. Venture Capital Market (VCM) – 1989 This board is closed to admitting new companies since 2003, however in share price pages this board is also reflected. Alternative Exchange (ALTX) 2003 In essence 2 boards exists: Main Board and Alternative Exchange © 12

MAIN BOARD REQUIREMENTS R 25 000 subscribed capital 25 000 equity shares in issue MAIN BOARD REQUIREMENTS R 25 000 subscribed capital 25 000 equity shares in issue 3 years profit history (R 8 000 before taxation) © 13

BULL AND BEAR MARKET Downwards trend © Upwards trend 14 BULL AND BEAR MARKET Downwards trend © Upwards trend 14

The JSE provides… Regulation of members and listed companies through the Rules & Directives The JSE provides… Regulation of members and listed companies through the Rules & Directives Electronic Trading (JSE SETS) – ensuring transparency & efficiency Electronic Settlement System guarantees settlement SENS – dissemination of price sensitive information Surveillance system – constant monitoring of members and their trading activities © 15

Major Market Influences International economics Company profits - Exchange rates -Global economies THE MARKET Major Market Influences International economics Company profits - Exchange rates -Global economies THE MARKET Commodity and gold prices International markets Local economy - Demand & supply - Inflation - Interest rates - Unemployment - Environmental factors *floods *drought *fires, etc - Crime rate Politics - What they say - Political state © 16

STOCK BROKERS Agents in trading Advice for the selection of securities Advice for the STOCK BROKERS Agents in trading Advice for the selection of securities Advice for the buying & selling (time) Research-based advice © 17

Investing Responsibility Do not borrow to invest Always invest in what you know Do Investing Responsibility Do not borrow to invest Always invest in what you know Do some homework on the company : Challenge! Buy the business, not the share Regularly review return on investments Be an active Shareholder – Know your rights Exercise patience, but do not get married to your share Diversify – do not put all your eggs in one basket Take calculated risk Make use of your stockbroker © 18

Sources of Stock Market Information Daily Newspapers Radio & Television Financial Magazines Annual Reports Sources of Stock Market Information Daily Newspapers Radio & Television Financial Magazines Annual Reports Stock Brokers JSE Monthly Bulletin Stock Market Handbooks Companies Publications © 19

Questionnaire Link Why should I complete this survey? As a member of Judicial Officers Questionnaire Link Why should I complete this survey? As a member of Judicial Officers Association, YOU are representatives of the retail market. We would like to ask your HELP with this initiative. Your participation will help us to develop Education programs tailored to YOUR investment knowledge needs. So, it’s VERY important that you are HONEST. Your results will make the difference! What is the survey about? We would like to learn whether YOU save or invest, how much YOU know about investments and whether you’re interested in investing. Please tell us! Please submit your completed survey by latest 27 February. Please follow the link to complete the survey: http: //www. surveygizmo. com/s/56912/jse-retail-investor-survey-legalpractitioners-copy If this link does not open, copy the link into an Internet browser. Thank you and enjoy! © 20

Thank you JSE Education Division Tel (011) 520 7127/8/9 Fax (011) 520 8586 E-mail Thank you JSE Education Division Tel (011) 520 7127/8/9 Fax (011) 520 8586 E-mail : [email protected] co. za Web : www. jse. co. za Copyright© JSE Limited 2005 www. jse. co. za