S Africa stock in­dex scales record high

Kuwait Times - - BUSINESS -

South Africa’s main stock in­dex scaled a record high yes­ter­day, un­der­scor­ing the mar­ket’s dis­con­nect from an econ­omy mired in re­ces­sion, hob­bled by dam­ag­ing rat­ings down­grades, and still largely de­fined by apartheid’s in­come in­equal­i­ties. Skewed own­er­ship pat­terns have made the Jo­han­nes­burg Se­cu­ri­ties Ex­change (JSE), which has been mostly lifted by the off­shore earn­ings of a few com­pa­nies, a prime tar­get of po­lit­i­cal re­sent­ment in a coun­try where the di­vi­sions be­tween haves and have-nots still run largely along racial lines.

Al­most half of the mar­ket is for­eign owned, ac­cord­ing to JSE data, and black peo­ple who ac­count for 80 per­cent of the pop­u­la­tion only hold 23 per­cent of the top 100 com­pa­nies, much of it through the Pub­lic In­vest­ment Cor­po­ra­tion (PIC) which man­ages the pen­sions of civil ser­vants. “There is white dom­i­nance and con­trol of our econ­omy. To­day when you re­move the own­er­ship by the (PIC) pen­sion fund from the stock ex­change, the re­main­ing 90 per­cent be­longs to white fam­i­lies,” the leader of the far-left Eco­nomic Free­dom Fight­ers party Julius Malema said at a week­end rally.

Those who don’t hold eq­ui­ties would in­clude the vast ma­jor­ity of the 17 mil­lion peo­ple, a third of the pop­u­la­tion, who re­side in the for­mer Homelands, is­lands of ru­ral poverty where most black South Africans were con­fined un­der white rule. South Africa’s of­fi­cial un­em­ploy­ment rate is around 28 per­cent but widely re­garded to be well over 40 per­cent and few of those with­out a job, the vast ma­jor­ity of whom are black peo­ple, would hold any shares.

The stark­ness of the di­vide is high­lighted by the fi­nan­cial district of Sand­ton where the JSE is lo­cated: a bus­tle of con­struc­tion ac­tiv­ity where or­nate of­fice tow­ers are be­ing erected on ev­ery block and huge cranes reach sky­ward, a fit­ting metaphor for a mar­ket at his­toric highs.

INC not be­hind rally

Sand­ton’s ap­par­ent pros­per­ity is a con­trast to the JSE’s con­struc­tion in­dex. Ground firmly in the wider lo­cal econ­omy, it is down about 20 per­cent from its year highs reached in March and is al­most 80 per­cent off its life high hit in 2007. The bourse’s per­for­mance the All-share in­dex rose 0.85 per­cent in early trade yes­ter­day to a new peak of 55,366.74 - has been driven by for­eign flows into eq­ui­ties and earn­ings gar­nered off­shore.

“It is the case that a hand­ful of shares not linked to the South African econ­omy’s for­tunes have done well,” said Feroz Basa, head of Old Mu­tual’s Global Emerg­ing Mar­kets Fund.

Naspers, a news­pa­per pub­lisher turned global e-com­merce gi­ant which ac­counts for over 20 per­cent of the JSE’s mar­ket cap­i­tal­iza­tion, was largely re­spon­si­ble for the JSE’s run, hav­ing risen sharply as in­vestors see it trad­ing at a large dis­count to its one-third stake in China’s Ten­cent.

Naspers, trad­ing close to an all-time high and up 42 per­cent so far this year, has its pri­mary list­ing on the JSE, and lux­ury goods group Richemont, which has a sec­ondary list­ings on the bourse, is up 21 per­cent. Only about 35 per­cent of the com­pa­nies listed on the JSE de­rive all their earn­ings from South Africa, said Gryphon As­set Man­age­ment an­a­lyst Cassie Treur­nicht.

“Our [lo­cally fo­cused com­pa­nies] have re­ally un­der­per­formed re­cently and if you look at small and medium cap shares it is hard not to no­tice the ef­fect of the re­ces­sion,” said Treur­nicht.

And big com­pa­nies ex­posed to South Africa’s bat­tle-bruised con­sumers, such as re­tail­ers and banks, have “un­der­per­formed sig­nif­i­cantly”, Basa said. Con­sumer sen­ti­ment is plumb­ing multi-year lows and most re­tail­ers have flagged lower or stalling prof­its, with the demise of un­listed de­part­ment store Stuttafords an omi­nous sign for other re­tail­ers.

South Africa fell into re­ces­sion in the first quar­ter of 2017 for the first time in eight years, with high un­em­ploy­ment and stag­nant wages drag­ging down the once re­silient con­sumer sec­tor. — Reuters

TOKYO: Peo­ple are re­flected on an elec­tronic stock in­di­ca­tor of a se­cu­ri­ties firm in Tokyo yes­ter­day. —AP

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