So you want to in­vest in so­cial me­dia com­pa­nies?

Finweek English Edition - - COVERSTORY -

BUB­BLE OR NO BUB­BLE, South African in­vestors in­vari­ably want to know how they can par­tic­i­pate in some of those listed coun­ters. The ob­vi­ous first an­swer is to call your bro­ker and buy Naspers shares on the JSE. You get a bit of Face­book, Ten­cent and Mail.ru as well as a num­ber of other in­ter­est­ing emerg­ing mar­ket plays. Hav­ing said that, you’re de­pen­dent on the de­ci­sion­mak­ing abil­i­ties of Naspers as a whole on buy­ing good so­cial me­dia prop­er­ties rather than the found­ing flair of Mark Zucker­berg to make you rich.

An­other op­tion is to wait for the list­ing of in­vest­ment hold­ing com­pany Black­star Group on the AltX. The com­pany holds Face­book shares worth US$400 000 in a busi­ness called FBDC Off­shore In­vestors LP. Small cap an­a­lyst Keith McLach­lan, of Thebe Se­cu­ri­ties, de­scribes Black­star as one of the purest plays to ac­cess Face­book but says he’s in­ter­ested to see what the group does with its shares post the ini­tial pub­lic of­fer­ing (IPO).

For the more so­phis­ti­cated in­vestor keen to trade off­shore, many lo­cal stock­broking plat­forms now of­fer the op­por­tu­nity to trade in those mar­kets. That gives ac­cess to listed plays: for ex­am­ple, LinkedIn and Ren­Ren.

John Vorster, a di­rec­tor at PSG On­line, says while such big name tech­nol­ogy plays have been mak­ing the head­lines in the fi­nan­cial news, clients haven’t rushed to put money into them. “I think what we’re see­ing is the clients who are most in­ter­ested in off­shore ex­po­sure tend to be older and more ma­ture or are be­ing guided by fi­nan­cial ad­vis­ers with a very low risk pro­file and, for that rea­son, are look­ing at tra­di­tional blue chips like Unilever, Volk­swa­gen and Nestlé.”

Vorster adds tech­nol­ogy com­pa­nies such as Microsoft and Ap­ple have proven pop­u­lar with clients who can’t find value in lo­cal tech­nol­ogy stocks, but points out those busi­nesses have ex­ten­sive trad­ing his­to­ries.

For those keen to par­tic­i­pate in the more spec­u­la­tive side of many of those coun­ters – and who have an ap­petite for some risk – the IDX Fu­tures prod­ucts from In­vestec may be worth a look. These prod­ucts are struc­tured very sim­i­larly to rand-de­nom­i­nated sin­gle stock fu­tures (SSFs) and are listed on the SA Fu­tures Ex­change (Safex).

In­vestec acts as the liq­uid­ity provider for the in­stru­ment and does the broking and set­tle­ment. These prod­ucts aren’t for the av­er­age re­tail in­vestor, as they re­quire roughly 10% of mar­gin – which trans­lates to be­tween R30 000 and R50 000.

“Im­por­tantly, this is a cash-set­tled fu­ture – mean­ing the stock will never be de­liv­ered to the client and the ac­tual rand will never leave our shores,” says Richard Swain, of In­vestec Cap­i­tal Mar­kets, “That then en­ables pri­vate in­vestors lo­cally to par­tic­i­pate with­out any re­stric­tions associated with the for­eign cur­rency al­lowance due to Na­tional Trea­sury dis­pen­sa­tion.”

Asked what strate­gies are prov­ing pop­u­lar with in­vestors, Swain replies the un­bundling of the po­ten­tial Naspers/ Ten­cent crossh­old­ing ar­bi­trage: Ten­cent cur­rently makes up more than 80% of the mar­ket cap of Naspers, leav­ing lit­tle val­u­a­tion of the lo­cal as­sets in the com­pany. Other pop­u­lar stocks in­clude long po­si­tions on the likes of Google and Ap­ple and long the more cash-flush US/Euro­pean con­sum­able in­dus­trial shares, such as Coca-Cola, and John­son & John­son.

MARC ASH­TON

MARK ZUCKER­BERG

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