JSE Lists Single Stock Future on Facebook
JOHANNESBURG, 18 MAY 2012 - South African investors can now gain exposure to Facebook, one of the worlds’ most anticipated I.P.Os without using their foreign allowance allocation. This is made possible through the today’s listing of Single Stock Future (SSF) contract on the JSE. The listing was timed with Facebook’s Nasdaq I.P.O.
Priced at $38 per share, Facebook’s initial public offering is expected to generate at least $16 billion. This makes it the third-largest I.P.O in US history and by the largest of any US internet company.
Exposure to Facebook is through the suite of Single Stock Futures (SSFs) listed on the JSE that track performance of the selected international companies. Called International Derivatives or IDX, the range of products includes SSFs on companies such as Nokia, LVMH Moet Hennessy Louis Vuitton, Bank of America, Apple and Berkshire Hathaway. “These derivatives offer local investors the opportunity to gain exposure to international blue-chip companies without dealing with a foreign bank or broker,” says Magnus De Wet Manager: Derivatives Specialist at the JSE.
The Facebook SSF can be purchased through any JSE-registered broker in the same way that one would purchase local derivatives products. While retail investors and corporate entities do not have any exchange control restrictions in trading the instrument, institutional investors do have to comply with foreign portfolio regulations. Contracts are priced and settled in Rands. If the Rand depreciates, then the local investor will benefit, allowing IDX products to be used as a rand hedge.
Why invest in IDX?
There are many reasons why IDX products are an attractive investment option for an individual investor looking for offshore exposure:
- You can obtain exposure to top international companies through your existing broker without any special permissions
- IDX products to be used as a rand hedge
- You will be able to further diversify your portfolio by sector
- Your initial margin earns competitive interest for the duration of your contract
- Trading in an exchange-listed product removes counter-party risk (the risk associated to the person or entity with whom the initial transaction was concluded) because the exchange becomes the counter-party to every futures position after trade. This means that market participants are protected from potential default by any other counter-parties
- With margin requirements of approximately 10%, IDX provide a capital efficient way to participate to gain exposure to equities
- You can sell short futures benefiting in a downward move in price
- The pricing of IDX is transparent
No investment trading product can offer the returns offered without the investor having to assume some risk and the old adage “High risk for high return” is appropriate to SSF trading. SSFs can offer significant returns but you could also incur significant losses if the market moves against your position. You may, in a relatively short time, sustain more than a total loss of the funds placed by way of initial margin or deposit.