Naspers and rand hedges dip on JSE
In a tale of two markets, the stronger rand caused rand hedges on the JSE to retreat on Tuesday, with Naspers sharply down, while banks and general retailers rallied.
In a tale of two markets, the stronger rand caused rand hedges on the JSE to retreat on Tuesday, with Naspers sharply down, while banks and general retailers rallied.
The rand strengthened against the dollar to levels last seen two months ago, as the market continued to price in a victory by Deputy President Cyril Ramaphosa at the ANC elective conference. The rand reached R13.4371/$ before weakening marginally. This brought the currency’s gains for the week so far to 1.6%, after firming nearly 3% last week.
The JSE all share closed 1.06% lower at 58,977.20.
Global miners and some rand hedges were hard hit, with Naspers in the same boat as global retailer Steinhoff facing potentially negative global lawsuits. Lawsuits in Germany, together with a potential investigation by the German tax authorities, drove Steinhoff to its lowest level in four years, ahead of the release of unaudited annual results on Wednesday.
Some investors believe Steinhoff could offer value as it is trading at a price:earnings of 12, but there was no rush to buy.
Sanlam Private Wealth analyst Carl Schoeman said the market was pricing in more than the current headwinds the firm was facing. “It is trading at a significant discount to its peers and a catalyst could be a solid annual operational performance.”
It also emerged that Naspers faces a potential class action lawsuit in the US, led by legal firm Pomerantz. The firm said it was investigating claims that Naspers and certain of its officers or directors might have engaged in securities fraud or other unlawful practices. This sent Naspers’s share price down more than 4% to its lowest level since early November. It closed 3.03% lower at R3,520.
The company also faces a possible parliamentary hearing into bribing allegations at its MultiChoice division. This comes at a time of increasing concern about the concentration risk Naspers presents to index investors, with the market heavyweight forming 19% of the all share index.
10X Investments CEO Steven Nathan said there was a lot of speculation driving Naspers’s share price growth rather than its underlying investment potential. “There was a reasonable chance it may stumble and lose substantial value.”
Banks and the banking index were up, with Standard Bank and FirstRand hitting annual highs. Standard crossed its previous high reached in May 2015 to close 2.62% higher at R181.66. FirstRand rose 2.47% to R58.41.