The Johannesburg Stock Exchange returns, political developments and economic forces : a historical perspective of the 1990s

Abstract

To contribute to economic growth and development, a stock market, as a leading economic indicator, should reflect the macroeconomic fundamentals of a country. The reflection of political and economic developments in the returns of companies listed on a stock market indicates the risk profile of those companies and the stock exchange. The objective of this article is to provide a historical perspective on how political and economic developments reflected in the returns of the Johannesburg Stock Exchange (JSE) during the nineties. The history of the JSE during the nineties can be divided into four periods: a pre-1994 era, the 1994 election, the 1995 big bang, and the post-1995 era. The study concludes that the JSE was exposed to extraordinary political changes and political events, eventually cumulating in a peaceful democratic election and a new political dispensation in 1994. Uncertainty surrounding future macroeconomic policy, global events such as the emergence of the Internet and the new economy, as well as an emerging market crisis, also impacted on JSE returns during the 1990s.