So you want to invest in social media companies?
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.