JSE firm as foreign investors take flight
AT THE rate foreign investors are deserting South African stocks, the country’s main index should be in decline. It’s not, thanks largely to two shares that draw their strength from Hong Kong and Zurich.
The Johannesburg Stock Exchange’s benchmark is up 0.6 percent this year, well short of the 16 percent advance in the MSCI Emerging Markets Index, after foreigners dumped a net R77 billion in local shares. That picture would have been worse if it weren’t for Naspers, the largest weighting in the index and biggest shareholder in Tencent Holdings, and Zurich-traded luxury retailer Richemont, said Shaun le Roux, a money manager at PSG Asset Management in Cape Town.
“The share prices of the two JSE heavyweights that have contributed most of the year’s returns, Naspers and Richemont, are not determined on the JSE,” said Le Roux, who helps oversee R33bn at PSG.
“Naspers tracks the share price of Tencent in Hong Kong, and Richemont’s primary listing is in Switzerland.”
Credit-rating downgrades, a moribund economy and political turmoil swirling around the presidency of Jacob Zuma have weighed on South African stocks in 2017. The foreign sales are larger than the R70bn offloaded a year earlier, figures from the stock exchange show. The selloff compares with inflows of R26bn by this point in 2015, and purchases of R20bn in 2014. Foreigners were net buyers by this stage in each of the five years preceding that.
“Foreign sentiment towards South Africa equities is poor and shareholder registers indicate widespread selling by foreign investors of most JSElisted stocks over the past few months,” said Le Roux.
Naspers, which constitutes 17 percent of the 166-member index, has gained 28 percent in 2017 as Tencent, of which it owns a third, surged almost 50 percent in Hong Kong.
The stake in China’s largest internet company has grown in value to about R1.5 trillion.
Richemont, the second-largest index member at 8.5 percent, has climbed 18 percent. With its focus on global luxury brands Richemont is less at risk from the SA economy.