India exit lifts Omem’s Africa expansion plan
Old Mutual Emerging Market’s (Omem’s) Indian exit marks the first of the insurer’s pullbacks from markets outside Africa. Omem is also selling its 50% stake in Chinese venture Old Mutual-Guodian, in line with its notice that it will sell all units outside Africa.
The pullback will see Omem, one of the four core units of the Old Mutual group, consolidate its African presence, going head to head with Liberty and, to a lesser extent, Alexander Forbes.
Liberty operates in 24 African markets, offering life insurance, asset management, short-term insurance and property and health insurance products. Omem has a presence in at least 11 of those markets, offering similar products, as well as asset management and banking services.
Alexander Forbes, under new CE Andrew Darfoor, sold its UK actuarial business Lane Clark & Peacock to focus on Africa, with a presence in five countries outside SA.
Other than its core retirement-administration business, Forbes offers investment, life insurance and short-term insurance products.
Omem’s African businesses brought in R12.3bn in its latest reported period, which dwarfs Liberty’s R4.1bn and Forbes’s R1.8bn, but it cannot afford to be complacent following Liberty’s shakeup to improve performance, including dispatching Seelan Gobalsamy, the former CE of its asset management arm, to oversee emerging markets.
At Forbes, Darfoor is planning to expand into Ghana, Nigeria and Morocco, which would grow the group’s African footprint even further.
Despite a short trading week, the listed property index had somewhat of a mini rally last week, seemingly spurred by nervous South African investors climbing back into rand-hedge stocks. The JSE’s property index rose 2.35%, with a number of offshore counters ending the week among the sector’s top performers.
Eastern European-focused sister funds, Rockcastle Global Real Estate Company and New Europe Property Investments (Nepi), gained 4.43% and 3.78%, respectively, while UK-focused offerings including the likes of Intu Properties, Capital & Counties Properties (Capco), Redefine International and Hammerson also ended the week 3%-4% higher.
While some of these stocks are now back in the black for the year to date, most are still in the red over 12 months. Redefine International’s share price is still down 33% over the past year. Intu and Capco have shed 26% since early May 2016. Rockcastle and Nepi, however, have held up much better with their respective 12-month losses coming to 11% and 16%.
Rand-hedge property counters, of which there are now about 20 to choose from on the JSE, underperformed property companies with SA-focused portfolios in 2016 on the back of a stronger rand. Stocks exposed to the UK were hardest hit given the added uncertainty of how Brexit will play out.
Renewed interest in randhedge property counters has no doubt been prompted by April’s two credit rating downgrades and SA’s precarious economic and political climate. Besides, the sector now offers good opportunities, with a number of offshore counters trading at discounts to net asset value following the considerable battering the sector has taken.