UPDATED: New listings in 2014 highest in years – no need to worry about Mr Market just yet

The JSE's final new listing of 2014, Cartrack, will hit the boards on Friday, taking this year's debutants to 23 - the highest since 2007.

Published on:

15 Dec 2014, 6:56 am

By Alec Hogg

The JSE's final new listing of 2014, Cartrack, will hit the boards on Friday. It will take this year's debutants to 23, the most in any year since 2007 and just one behind 2011 and 2012 combined. The number of companies going public is a good reflection of the state of the equity market. So with this significant increase, should we be worried?

Not yet. The 2014 total is still behind the 27 new listings of 2006 and far off the following year's 41 – the JSE's last boom-bust cycle. South Africa's economy is set for an oil-price assisted lift in 2015, hopefully fewer strikes and definitely more focus on the key Eskom problem. So there's every chance of another strong year for shares, something which will attract the attention of even more private companies. It's time to get concerned once the number of JSE debutants get to 2007 levels. We're still some way off that.

Donovan de Abreu writes:

Firstly I would like to start off and say thanks for your daily updates which I have subscribed to. Your comments are informative, and I enjoy your quirky humour. Then the Biznews website is one of the best business news websites I have encountered, and with the SENS Link, it keeps me upated on what all the large players in the market are doing.

Just with regards to your comments on today's newsletter, where you elude to the fact that more listings are "bad" for the economy. I'm not an economist by any means, and probably not the smartest investor the world has ever seen, but shouldn't listings be good? Companies list to obtain finance and funding for growth prospects and sustainability strategies, but with the high cost of listings, the cumbersome requirements and obviously the public backlash that potentially could come with that and of course on the back of that decreased value of a company if not seen to be on the right path by shareholders is enough to put any one off listing their private company. Just trying to understand your sentiment when saying more listings on the JSE is not a good thing. The fact that more companies are listing says that they see value in the market, and they believe in the South African economy, which has not had the cleanest reputation of late.

Alec Hogg responds:

Thanks Donovan. In the interests of brevity, the daily newsletter can sometimes leave a little too much unsaid. As I clearly did here. As you point out, new listings are definitely good for the economy – and by stimulating these and facilitating the raising of capital, the JSE plays a critical role in South Africa's development.

My concerns about new listings is from a tighter perspective. When stock markets rise too high, the inflated ratings attract an excessive number of new listings. The number of debutants is an excellent indicator of the value in the general market – ie too few and Mr Market has gone into a depressive funk (time to buy); too many and it's a signal that he's become manic (time to sell). My point in today's newsletter is that although 2014's new listings are the highest in seven years, they have not yet reached levels where we need to worry about Mr Market becoming too optimistic. Trust that helps.

South Africa

Eskom

India

Cartrack

UPDATED: New listings in 2014 highest in years – no need to worry about Mr Market just yet

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