These are the 6 stocks helping hold up the JSE right now: report
Foreign investors are pulling out of the South African market at an alarming rate, but instead of sending the JSE into a decline, the index has maintained its strength primarily due to just two stocks, according to a new analysis by Bloomberg.
The JSE’s benchmark is up 0.6% this year, well short of the 16% advance in the MSCI Emerging Markets Index, after foreigners dumped a net R77 billion rand of local shares.
However these numbers could have been much worse if not for media conglomerate Naspers Ltd and luxury retailer Richemont, noted the report.
The share prices of the two JSE heavyweights that have contributed most of the year’s returns, but are not actually determined on the JSE but rather Hong Kong and Zurich, said Shaun le Roux, a money manager at PSG Asset Management speaking to Bloomberg.
Naspers which currently constitutes 17% of the 166-member index has gained 28% in 2017, primarily because Tencent, of which it owns a third, surged to almost 50% in Hong Kong.
In comparison Richemont, the second-largest index member at 8.5%, has climbed 18%. With its focus on global luxury brands like Baume & Mercier and Montblanc, Richemont is less at risk from the South African economy, noted Le Roux.
However Richemont and Naspers are not the only big players on the JSE.
Six companies (Naspers, Richemont, BHP Billiton, Anglo American, British American Tobacco and the MTN Group) account for just over 42% of the All-share composition, with the remaining 160 members making up the rest.
In comparison to strong contenders Naspers and Richemont, BHP Billiton is currently trading up over the past year (1.36%), alongside Anglo American (9.5%), while British American Tobacco is currently under-performing at (0.02%)
The MTN Group has proven to be the big outlier of the six, posting a -25.18% result over the last year and a more concerning -51.25% drop over the last 3 years.
Investing
According to Le Roux foreign sentiment towards South African equities remains poor and shareholder registers indicate widespread selling by foreign investors of most JSE-listed stocks over the past few months.
However he also noted that this could point to a good investment opportunity for local traders.
“The outflows present an opportunity for domestic investors as valuations drop. The 14-day RSI on the main Johannesburg index fell below 30, a level that indicates stocks may have fallen too far and be poised for a rebound, on June 6 for the first time since September.”
“In our experience, foreign selling amid poor sentiment often provides a very good opportunity to buy good businesses at attractive prices for our clients,” he said.
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