Heavy­weight share prices warn­ing in­vestors

Finweek English Edition - - Cover Story -

THESE ARE South Africa’s crown jew­els: the biggest and the best shares on the JSE that are fall­ing the fastest. And, along with them, they’re drag­ging the whole JSE down, in­clud­ing the Alsi. For­tu­nately or un­for­tu­nately, the com­bined mar­ket cap­i­tal­i­sa­tion of the top 10 listed com­pa­nies on the JSE is still around 40% of to­tal mar­ket cap­i­tal­i­sa­tion on the JSE. It’s also a fact that the prices of these shares are de­ter­mined in US dol­lars, and es­pe­cially in ster­ling. And if the value of the cur­rency of their pri­mary list­ings is suf­fer­ing it sim­ply trans­lates into weaker prices on the JSE.

But it’s not much con­so­la­tion to tell a South African in­vestor he mustn’t worry about the 20% fall in the price of BHP Bil­li­ton from R259 to R209/share. Af­ter all, his rand is now worth much more and with BHP Bil­li­ton weaker, he can still buy just as much in Europe as three months ago. He’s 20% down, even though the world’s lead­ing an­a­lysts say it’s the world’s best and most sought-af­ter re­sources com­pany.

The same cer­tainly goes for An­glo. Frus­trated in­vestors can cer­tainly won­der why more don’t flee to Bri­tish Amer­i­can To­bacco. It’s a ba­sic con­sumer prod­uct that pre­vi­ously proved it­self to be above eco­nomic cy­cles.

The weak per­for­mance in the share prices of top com­pa­nies on the JSE cre­ates new and even dan­ger­ous in­vest­ment chal­lenges. Port­fo­lio man­agers are forced to in­vest in those top shares. If you want to avoid poor per­for­mances you must pick the shares your­self. Re­mem­ber, it’s dan­ger­ous – and even the best DIY in­vestor is cur­rently strug­gling to pick any win­ners.

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