CityPress - - Business -

The FTSE/JSE All Share In­dex is dis­mally un­der­per­form­ing all ma­jor global eq­uity mea­sures due to South Africa’s stag­nant growth, “junk” in­vest­ment sta­tus and in­vestors’ un­cer­tainty about the coun­try.

Eu­gene Che­maly, Afrifo­cus Se­cu­ri­ties MD, said on Fri­day that the in­dex was un­der­per­form­ing the ma­jor MSCI indices and the S&P 500 due to the lack of growth in South Africa and the fact that two of the ma­jor credit rat­ing agen­cies, S&P Global Rat­ings and Fitch Rat­ings, down­graded at least one of their mea­sures of South Africa’s abil­ity to re­pay its debt, to junk sta­tus.

This sce­nario means lo­cal con­sumers are un­der pres­sure and do­mes­tic com­pa­nies, listed on the JSE, are pro­duc­ing prof­its be­low ex­pec­ta­tions.

“When a listed com­pany has to down­grade their earn­ings fore­casts, that causes their share price to un­der­per­form,” Che­maly said.

South Africa’s econ­omy is grow­ing at 0.5% while the world, on av­er­age, is ex­pand­ing at 3%.

This un­der­per­for­mance means the coun­try and lo­cal in­vest­ment as­sets are not con­sid­ered a “buy”. In­stead, Che­maly ad­vises lo­cal in­vestors to move as much of their money off­shore as pos­si­ble.

“Money flows to where money grows. Un­til the ANC’s elec­tive con­fer­ence in De­cem­ber has passed, JSE stocks aren’t likely to see much move­ment,” Che­maly said.

Petri Redel­inghuys, Herenya Cap­i­tal Ad­vi­sors founder, said that gen­eral in­vestor sen­ti­ment to­wards South Africa is “very neg­a­tive”.

This is due to the lack of growth and dras­tic and un­pre­dictable changes in lo­cal poli­cies.

Ex­am­ples of these changes in­clude the im­po­si­tion of the min­ing char­ter, which knocked lo­cal min­ing shares, reg­u­lar changes to the per­son who holds the po­si­tion of fi­nance min­is­ter, state cap­ture and con­tin­ued strug­gles at state-owned com­pa­nies.

This had cul­mi­nated in for­eign in­vestors sell­ing sig­nif­i­cant amounts of lo­cal eq­ui­ties, Redel­inghuys said.

– Justin Brown

FTSE/JSE All Share

MSCI AC Asia ex Ja­pan


MSCI Europe S&P 500

MSCI Emerg­ing Mar­kets NR USD

1.2 5.9 4.1 4.5 4 5.9

7.7 23.9 14 19.5 10.9 22.4

10.6 19.4 12.7 16.4 11.1 19.9

5.6 14.7 13.8 10.1 16.9 11.2 12.1 19.4 21.5 19 25.2 15.4

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