It’s early days. But, at the risk of invoking the dreaded “commentator’s curse”, the FM can state that the new political dispensation has, so far, been good for the JSE. The absence of load-shedding has helped too. While some pundits are a little disappointed that foreign buying has not been as enthusiastic as expected, the scorecard does make fairly encouraging reading.
The JSE’s all share index (Alsi) has, since roughly a month ago — when there was still a good deal of uncertainty about the political trade-offs needed to form a cabinet — gained about 8%. Since mid-March, when fears abounded about a possible radical shift in the political power dynamic, the Alsi is up about 14%.
In recent years investors have become accustomed to the JSE being supported by its large international listings. This time it is refreshingly different. The financial index, reflecting strong gains in the big banking stocks, is up 25% over three months. The JSE’s mid-cap and small-cap indices, which reflect largely South Africa Inc stocks, are up 12% and more than 14% respectively over three months. The JSE’s resource 10 index, which is loaded with global mining groups, has dribbled down close to 2%.
Reports suggest that the initial foreign buying has homed in on large retailers like Pepkor and Shoprite, along with financial services counters like FirstRand, Standard Bank, Capitec Bank, Discovery and Old Mutual.
With a heap of value stashed away in overlooked second-line and mid- and small-cap counters, it is hopefully just a matter of time before more discerning offshore investors start looking wider for value.
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