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Carnage: SA property stocks plunge on jitters over debt levels

By Renee Bonorchis, Neo Khanyile and Loni Prinsloo

(Bloomberg) — South African property stocks fell the most in more than two years on speculation that some of the companies are overvalued and might be named in a negative research report that is yet to be published.

JSE, 2 Gwen Lane, Sandown, Sandton

The 21-member FTSE/JSE Africa Listed Property Index plunged as much as 8.5 percent, the biggest drop since December 2015, before paring losses to trade 2.3 percent down by 11:36 a.m. in Johannesburg on Thursday. Resilient REIT Ltd. plummeted as much as 22 percent, a record decline, before trading 4.7 percent lower. Greenbay Properties Ltd., Fortress REIT Ltd.-B and Nepi Rockcastle Plc all recovered from declines of as much as 20 percent.

Rumors that Viceroy Research will be releasing a report on a South African property stock are fueling the losses, according to David Shapiro, deputy chairman of Sasfin Wealth in Johannesburg. Viceroy, who refers to itself as a U.S.-based short-seller, published a report highlighting some of Steinhoff International Holdings NV’s challenges shortly after the retailer announced it is investigating accounting irregularities that led to the resignation of its chief executive officer and chairman.

“Traders are taking advantage of it and plugging the market without really applying common sense,” Shapiro said. The real estate counters “are overvalued, but so is our market. We’ve got a hothouse of debt. Everyone is now panicking.”

‘Wrong Side’

Steinhoff has lost more than 80 percent of its value since the owner of France’s Conforama, Mattress Firm in the U.S. and Pep in South Africa said there were anomalies with its numbers on Dec. 5. A person who claimed to represent Viceroy declined to comment on any impending reports.

“The market is going through each company with a fine-tooth comb at the moment,” said Petri Redelinghuys, founder of Johannesburg-based stockbroker Herenya Capital Advisors. “Following the Steinhoff collapse no one wants to be caught on the wrong side of that. It’s actually insane what’s going on with a company that can fall as much as 20 percent and then recover within three or four hours.”

Read also: Robust property rights essential for SA’s future prosperity – IRR

Aspen Pharmacare Holdings Ltd. slumped on Jan. 9 amid speculation it might be Viceroy’s next target. The drugmaker’s CEO, Stephen Saad, wants South Africa’s stock-market regulator to probe possible market manipulation, Johannesburg-based Business Day reported on Thursday. As the focus shifted to property stocks, Aspen climbed as much as 8.5 percent, ending seven days of losses.

A representative for Resilient said the stock is moving on market speculation of a possible Viceroy report, adding that the real estate investment trust hasn’t been contacted by the research firm. Fortress CEO Mark Stevens said he can’t comment because the JSE does not allow a listed company to comment outside of regulatory announcements during a closed period. Calls to Greenbay’s offices weren’t immediately answered. Nepi Chief Financial Officer Mirela Covasa said the company is looking into why its shares are declining.

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