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Figure 15 ALSI results one week after Brexit announcement

Volume

600 000 000
Brexit referendum
500 000 000 results are
400 000 000 announced before
market open.
300 000 000

200 000 000
100 000 000
0
5/6/2016 5/13/2016 5/20/2016 5/27/2016 6/3/2016 6/10/2016 6/17/2016 6/24/2016 7/1/2016 7/8/2016

The uncertainty surrounding the referendum result was not just due to the UK leaving a
27-nation trading bloc, or that during this period, the UK parliament had only an acting
Prime Minister and almost no opposition given the 172-to-40 vote of no-confidence in
its leader. The problem was that because both the UK and the EU are so tightly trade-
coupled to the rest of the world, it spooked the market and – as is almost always the
case – led to a flight to gold, which has seen a remarkable rally in both the commodity
as well as listed gold equities.

The real story, however, is not evident in the figure, and therefore could be left untold,
had it not been for eagle-eyed investors watching the first hour of the first trading session PROVINCIAL OUTLOOK NATIONAL OUTLOOK GLOBAL OUTLOOK GAP HOUSING INVESTOR NARRATIVE SPOT THE OPPORTUNITY PORTFOLIO INSIGHTS KHULISA NEWSLETTER ELECTRIC VEHICLES ENERGY SECURITY LOOKING AT GDP
on the JSE on Monday, 27 June 2016. The data above is based on end-of-day closing
prices for the ALSI. Tick data (the change in the price of a share from trade to trade) of
that first hour showed a drop in price of many stocks by as much as 9% – purely as an
emotional response to the result. By midmorning it had recovered to previous trading
day levels, before closing down again at the end of the day. This pattern was repeated
(to some extent) every trading day for the next week giving cash-rich investors a great
opportunity to increase their holdings, whilst simultaneously lowering their average cost
price.

So that’s the buying opportunity, dear reader – and I hope you had the cash and the
courage to get in as much as you could.

But what is the lesson for the retail investor? The lesson could be – always support your
companies. You live here, so do they. You have a far better chance of predicting the
future if you are using the goods and services of our listed companies on a near-daily
basis. Brexit or no Brexit – do you still buy airtime? Do you still buy toothpaste? Do you
still purchase groceries, then put petrol in your car on the way home from work? Do you
still pay school fees, your rent, your bond? Do you still treat yourself?

Life finds a way to move on, doesn’t it and eventually, not only is equilibrium restored,
but so too the upward trend of value.

QUARTERLY ECONOMIC BULLETIN 2016 45