The prowling bears seem to be laden with menace
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.