The world is changing fast and to keep up you need local knowledge with global context.
As is customary for a Monday, South Africa’s favourite market commentator David Shapiro gives us the latest on the equity markets across the globe. David and BizNews founder Alec Hogg touch on a number of topical investment related matters. After a great start to the year, the JSE has had a tough few months, with heavyweights Naspers and Prosus dragging the index lower. The resource counters have also experienced drawdowns with commodity prices across the board softening as the year has progressed. David shares his pearls of wisdom on cryptocurrencies, with the veteran analyst outlining that regulation is crucial in order for it to become an investable asset class. – Justin Rowe-Roberts
David Shapiro on the Chinese government continuing to tighten its grip on capitalism:
Each day we think that this is the bottom and the next day an even deeper bottom has formed. So it’s been very hard for us to guess. As you rightly point out, we look at Naspers and Prosus on our market. I think they must be down 26% year-to-date. I haven’t assessed it because each day it’s different, but there have been huge losses in both of them. They make up a big chunk of the index and we’ve shifted towards a passive type of investing where you buy the index, you buy ETFs – many of which have got very, very large exposure to Naspers and Prosus. It’s hurting the savings of this country and there’s no way out. I think at one point the JSE All Share Index was up about 17% or 18% – not too long ago, maybe a month or so. And subsequent to that, we’ve given back a lot. We’ve had a slight sell off in some of the commodities. But to a large extent, this is the China effect taking our market down. I think as we stand at the moment, we’re probably up 7% or 8% percent for the year. With something like Naspers and Prosus minus 25% – so massive of underperformance in that – and it doesn’t look like it’s ending. Each day something else comes.
On the lopsided weighting of Naspers and Prosus on the JSE:
There’s no doubt about it – I’ve always had the argument that although they are not dynamic stocks – stocks like AB InBev, Glencore, British American Tobacco are very, very large companies. Now, the stock exchange decides on the indices and they look at what they call the float. In other words, what’s the float in South Africa? And I’m saying hold on a second. In today’s world – if I need float – I just have to put an order into London, I’ll get float. You must look at the size of the business, because we can trade as many shares as we like in Glencore, British American Tobacco, AB InBev – or any of those other big internationals as well. I’ve always hoped that they would include that so as to dilute the impact of Prosus and Naspers. Then perhaps adjust some of the other shares as well, to give them greater weightings. So you’re dead right. But that’s for the passive investors – the money has been made in small and medium capital stocks in our market at the moment.
On which shares have been outperforming on the JSE:
It’s been right across the board with respect in the small-to-mid cap space. Some of the retailers have done very well. Banks have been moderate. But there have been a lot of manufacturing businesses as well that have come right and got their acts together – food businesses and so on. And we’ve ignored them, simply because they don’t have a big weighting in the index. I try to get the message out to say – if you’re running your own portfolio and you’re not running a multibillion rand fund where you need liquidity, you would have outshone even the most professional investors simply because there’s been such rich pickings down at some of those levels.
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