SA stocks knocked by MSCI re-weighting; net outflows surged to R13.3bn

By Adelaide Changole and Colleen Goko

(Bloomberg) – Foreign investors’ sales of South African stocks jumped to a record as emerging-market index changes by compiler MSCI Inc. prompted money managers to adjust their holdings.

Net outflows surged to R13.3bn ($894m) of South African shares Tuesday, compared with net purchases of R389m in the previous session, figures from stock exchange operator JSE Ltd. show.

MSCI added twenty-six China shares, 30 equities from Saudi Arabia and eight Argentine securities to its emerging-market stock benchmarks, at the expense of South African stocks in changes that took effect Tuesday. Net sales of Naspers Ltd. were the largest Tuesday, at R4.9bn. Nedbank Group Ltd., Hyprop Investments Ltd., Bidvest Ltd. and FirstRand were also in the top five, the JSE figures show.

“South Africa’s weighting went from 6.34% to 6.05% in the MSCI emerging market index,” said Matete Thulare, an analyst at FirstRand Bank in Johannesburg.

MSCI is the world’s biggest index compiler and its emerging-markets index is the most important for the asset class, with as much as $1.8trn in assets benchmarked to it as of June 2018. South Africa’s main stock index was 0.5% higher as 11:03am in Johannesburg Wednesday.

Comment from Andre Botha, Senior Dealer at TreasuryONE:

“There was a re-weighting on the MSCI Emerging Market Index yesterday, whereby SA’s weighting dropped from 6.34% to 6.05%, we saw big outflows out of SA equities of around R13bn, this is part and parcel of the big blow out of the currency yesterday. We suspect that all the other factors surrounding the uncertainty of the cabinet and the trade wars and risk off in the markets just adds more fuel to the fire. USDZAR currently trading at R14.88 still the weakest emerging market currency.”

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