Investor confidence hurting MTN: analyst

Deteriorating foreign investor confidence is hurting mobile operator MTN, which has seen its shares decline by more than 10% in recent sessions, an analyst says.

Shares in MTN declined for yet another day on the JSE on Thursday (6 June), down R4.22 or 2.48% to R166. MTN has declined from a close of R182.80 on May 31st and an overall 52 week high of R185.90.

The analyst at PSG Konsult pointed out that the All Share Index declined 1.11% on Thursday to 40,341 points, while the rand flirted with R10 against the greenback.

He said that foreign investor inflows have started to dry up, with many looking at other emerging markets given the state of the local economy, the weak rand, and labour unrest among other things.

SA Reserve Bank Governor Gill Marcus said on Thursday that South Africa requires clear action to stabilise labour relations.

The Governor noted that South African gross domestic product (GDP) grew by just 0.9%.

Marcus said employment was still below pre-recession levels, and wildcat labour disputes and high wage demands in the mining sector negatively impacted South African exports.

“These developments and vulnerabilities have adversely affected both domestic and international business confidence and investor sentiment towards South Africa, and this has been reflected in the currency which has depreciated by about 12%… since the beginning of this year.”

The analyst said that reluctance from foreign investors to enter the local market was hurting company like MTN, which tops the Satrix SWIX Top 40, and is one the most liquid traded shares in the country and attractive to the foreign eye due to its dividend yield and payout policy.

Earlier this week, Fitch Ratings  downgraded MTN‘s National Long-Term Rating to ‘AA-(zaf)’ from ‘AA(zaf)’ citing the group’s heightened business risk profile as a result of its growing reliance on cash generated from weak non-investment grade countries.

“The ratings call obviously hasn’t helped MTN’s cause,” the analyst said.

Fitch said that with mobile penetration rates in South Africa now well in excess of 100% in addition to intensifying competition‚ the slowdown in the group’s South African operations will place increasing reliance on cash flow growth from non-South African operations to service debt at the Holding Company (HoldCo) level.

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Investor confidence hurting MTN: analyst