Heavyweight share prices warning investors
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.