In a move that’s widely expected to attract further, and much needed investment diversification, Finance Minister Pravin Gordhan yesterday announced that the Treasury will allow local investors to trade in foreign-domiciled companies, especially throughout Africa. The move will no doubt heighten the attractiveness and status of the local exchange.

Although the new measure only looks set to take effect in January 2012, it will still be considered a move in the right direction in respect of making the JSE a more appealing investment destination for locals and foreigners alike.

JSE CEO, Russell Loubser, explained the exciting development in plain English:

The positive move provides a further boost for the reputation of the country’s markets by enabling the JSE to more aggressively pursue a wider range of investment possibilities.

[Restrictions in the past] limited the amount of local activity in the foreign companies and hence the JSE’s ability to position itself as an investment destination.

What’s exciting is the fact that foreign companies will now be able to expand into Africa, via the JSE, and collective investment funds like retirement funds, investment managers and long-term insurers would be able to invest more offshore too.

As Loubser also notes, the hindrance to local investors in the past was that they were virtually unable to buy shares in foreign companies, especially on the exchange’s indices because the JSE simply could not include foreign companies in these indices.

Investec Asset Management’s head of equity and derivatives trading, Doug Blatch, was also pleased, and explained the move:

…was positive, and effectively is a further relaxation of foreign exchange controls. It gives institutional investors more choice and more local opportunities and increases liquidity.

Gordhan also announced that R25 billion is to be used over the next six years in an effort to enhance the competitiveness of local manufacturing companies.

[Source: BusinessDay]