The prowl­ing bears seem to be laden with men­ace

Financial Mail - Investors Monthly - - Editor’s Note - RON DERBY fol­low Ron on Twit­ter @ron­derby

WELCOME TO our June edi­tion, com­piled amidst grow­ing mar­ket jit­ters. Could this be the long over­due shake-out in sen­ti­ment that trig­gers a mean­ing­ful mar­ket cor­rec­tion? Or are we again go­ing to de­fer our deep­rooted fears that eq­uity prices are stretched, lulled by another sec­ond half stretch in the All Share In­dex?

I ad­mit that per­haps I’m too easily spooked these days, but the sense is that the bears prowl­ing the pe­riph­ery of the JSE look a lot more men­ac­ing this year. Cer­tainly the bears have their claws tear­ing into the val­u­a­tions of some of our lo­cal in­dus­trial coun­ters — es­pe­cially those with prospects firmly tagged to the dan­ger­ously dour SA econ­omy.

I have been mor­bidly fas­ci­nated with the se­vere pun­ish­ment be­ing meted out to con­struc­tion gi­ant Aveng, even af­ter a trad­ing state­ment con­firmed earn­ings, al­beit markedly down, had not com­pletely buck­led. Does one start re­ally wor­ry­ing when the mar­ket seems to lose faith in large stal­wart coun­ters re­gain­ing op­er­a­tional trac­tion? Then again, even good news gets dis­counted these days.

A decade ago this sit­u­a­tion would have caused preda­tors to start cir­cling. It pains me to ask, but is the im­pli­ca­tion that parts of the lo­cal econ­omy are no longer worth in­vest­ing in?

Still, move­ments in the over­all mar­ket — which these days is not a proxy for the lo­cal econ­omy — tend to mask these con­cerns. I sus­pect we are again look­ing at a self-ful­fill­ing prop-up in the Alsi. And I say this be­cause ev­ery dip in our global blue chips (SABMiller, Richemont, Naspers, Aspen etc) con­tin­ues to be short-lived as another load of small in­vestors — des­per­ately keen to hedge against not only rand weak­ness but also in­creas­ingly brit­tle lo­cal eco­nomic prospects — pays a pre­mium price to pile in with vigour.

Sig­nif­i­cantly the African theme is in­creas­ingly preva­lent in this mag­a­zine and other fi­nan­cial publi­ca­tions. While one senses that listed com­pa­nies are in­creas­ingly start­ing to look for growth op­por­tu­ni­ties be­yond the con­ti­nent the ef­forts to cre­ate and main­tain vi­able African foot­prints could make or break com­pa­nies over the next decade.

With this in mind, Andile Makholwa’s in­sights into African mar­ket ex­pan­sion – cen­tred around Tiger Brands’ en­deav­ours in Nige­ria — is a must-read in this edi­tion, of­fer­ing some im­por­tant per­spec­tives that are some­times lost when com­pa­nies bust en­thu­si­as­ti­cally into African mar­kets.

For those in­vestors that have scur­ried for the safety of a yield un­der­pin, Joan Muller takes a com­pre­hen­sive look at the JSE’s prop­erty coun­ters to gauge whether there are any worth­while op­por­tu­ni­ties re­main­ing.

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