The Johannesburg Stock Exchange has seen a decline in foreign participation over the past five years as economic growth slowed and South Africa’s relations with western countries soured over perceived support for Russia and China.

The exchange’s Capital Markets Director Valdene Reddy told CNBC Africa in an interview that there is anecdotal evidence that foreign holdings of individual companies and the market in general has dropped in the past few years.

“We’ve seen it come down where you talk to the local companies, and they say their shareholder register of foreign ownership has decreased,” Reddy said. “It is different in terms of different names and counters, but it has, in general, decreased across the board.”

The JSE, Africa’s largest stock market, has seen its weighting dropping around 3 percent in emerging market indices as South Africa almost tipped into a recession in 2023 amid power shortages and a logistics crisis that curtailed export growth. So far this year, foreign investors have sold a net R36 billion of South African equities, 25 percent up compared with a year ago.

Growth is forecast to almost double to more than one percent this year as power supply improves and after the country’s general elections next month. Reddy said that should attract more investment in a market she says is undervalued. “In general, South Africa trades between a 20 to even 40 percent discount in intrinsic and your net asset value of the company in some of our mainline counters. So it actually holds quite a lot of value in terms of the discount not only to emerging market peers, but also to developed world majors,” she said.

She noted that foreign investor activity in the JSE has been concentrated in the top 40 to top 60 counters, rather than specific sectors with interest in exporters and dual-listed defensive stocks.

South African bonds have also attracted interest from global investors from a yield perspective, she said. JSE data shows foreign investors have bought a R29 billion rand of South African bonds so far this year versus net sales of R17 billion at the same time a year ago.