The Johannesburg Stock Market can be followed by spread betting on the South Africa 40, an index of the top 40 companies on the stock exchange. Heavily focused on natural resources, including gold-mining, this can be quite volatile. The spread betting quotation at the moment is 29,139 – 29,179.
If you are bullish on the Johannesburg Stock Market Index, you might want to place a “long” spread bet, “buying” a position of £5 per point at the quote of 29,179. Assuming it goes up, you are prepared to take your profit when it reaches 30,035 – 30,075, and you close your bet at the “selling” price of 30,035.
Here is how you can work out how much you won: –
- You have gained the number of points from the opening to the closing values
- that is 30,035 less 29,179
- the total number of points you gained is 856
- you bet at a level of £5 per point
- therefore your total profit is £4280
Sometimes the index will not go your way, and so you must also consider how much you can lose. Say the index went down, and got to a level of 29,026 – 29,066, and you decided to cut your losses and close your bet.
This is how you figure out your losses: –
- you have lost the number of points the index went down from your opening to closing positions
- that’s 29,179 less 29,026
- that works out to 153 points
- you bet at a level of £5 per point
- therefore the total you lost is £765
Remembering that you can bet easily on an index to go down, you might have decided to place a “short” bet in the first place, when the original quote was 29,139 – 29,179. As you are “selling” the position this time, your bet goes on at 29,139. Say you bet £1.50 per point.
After a while, your spread betting provider is quoting 28,538 – 28,578, and you decide to close your bet for a profit. As it was a short bet, it closes at the higher number of 28,578. Again, your profit is easy to work out, you simply multiply the points gained by the stake per point.
- You gained the number of points that the index went down
- that’s 29,139 less 28,578
- so you gained 561 points
- multiplying by your stake per point
- your total winnings are £841.50
If instead the index had gone up after you placed your short bet, then you would have been facing a loss. You would need to close the bet quickly to minimize how much it cost you. Say you close the bet when the quote on the South Africa 40 is 29,182 – 29,222. Again as a short bet it closes at the “buying” price of 29,222.
- You lost the number of points that the index went up
- which is 29,222-29,139
- so you lost 83 points
- multiplying by your stake per point
- you lost a total of £124.50
How to Spread Bet the Johannesburg Stock Market
The Johannesburg Stock Market is the largest in South Africa, and 16th largest in the world. Nowadays, it goes by the name of JSE Limited. It was founded in the 19th century, principally because South Africa has long been recognized as a major source of mining gold. Therefore, the predominance of shares in the early days was in mining companies and financial companies.
One of the indices listed with spread betting company IG Index Is the “South Africa 40”, which as the name implies takes the top 40 companies on the Johannesburg Stock Market and combines their share values into the index. This is also sometimes called the FTSE/JSE Top 40. The London Stock Exchange has been helping the JSE considerably in the last 10 years with its trading systems and cross-trading.
There are nearly 500 companies listed on the main JSE, and all of the companies are subject to strict guidelines, which means that the JSE has created an alternative exchange called the AltX for smaller companies that cannot satisfy these controls. The JSE is also looking to expand its reach across the African continent, and list shares from other African countries. It sees its primary purpose as helping companies and corporations in Africa to raise capital, and improve the overall economic conditions of the continent.
With this as background information, you need to have an appreciation of what makes up the index. Of the top 10 companies in the index, half are still mining companies. While there is inevitably a lag between mining expenditure and operation, and the market for refined gold, the world economic situation has undoubtedly turned more focus towards the gold and precious metals market, and in the long run this will continue to strengthen the position of the exchange.
It is evident that there are a few highly capitalized companies, and many smaller ones. Out of the 40 companies listed in the Johannesburg Stock Market Index, the top 10 companies account for 70% of the value.
The one way offered by IG Index to spread bet on the Johannesburg Stock Market is with the previously mentioned South Africa 40 as a futures based spread bet. Since the mining industry, with heavy representation, can react to market forces differently from the indices of mainly manufacturing countries, you will need to spend some time becoming familiar with the typical movements of the FTSE/JSE Top 40.
In particular, you should note how large the swings are that the index can have from day-to-day. When you are trading on a futures bet, the spread tends to be larger than with a rolling daily bet and therefore you have to look for more movement in the index to make a decent profit. But when you are in a spread bet for a period of time, the volatility is more likely to trigger your stop loss order, whose purpose is to prevent you from suffering too badly if the price runs against you. Therefore you need to keep a realistic size of bet that allows you to tolerate the volatility without harm.