• Sunday, July 21, 2024
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S.Africa stocks slide as Shoprite, Aspen hit by valuation worries


South African shares snapped a three-day winning streak on Friday, dropping 1.6 percent as investors took profit in Shoprite, Aspen Pharmacare and other index heavyweights that had clocked up recent big gains.

Stocks in Africa’s most advanced economy rose 4 percent in the previous three sessions, reigniting concerns that prices were overheated.

However, the caution could be short-lived given the volatility in global markets and indications on Thursday that the U.S. Federal Reserve is in no hurry to start raising rates, trader said.

“Even though the SA Top-40 index still looks over-valued, South Africa has been tracking global markets, which are running on sentiment around possible quantitative easing in Europe and China,” said Uresh Perera, a trader at Global FX Macro.

Local shares could also get a bounce next week after U.S. job figures on Friday were slightly better than expected.

The JSE Top-40 index lost 1.55 percent to 42,995, while the broader All-Share index dropped 1.3 percent to 48,951.

Despite a lacklustre 6 percent rise last year — and on-going concerns about the domestic economy — the Top-40 is the fifth most expensive index among more than 30 emerging market stock indices tracked by Thomson Reuters.

“South African equities as an asset class are fully priced and not a compelling investment,” Adrian Saville, the chief investment officer at Cannon Asset Managers, said in a note this week.

Shoprite, Africa’s largest grocer, tumbled 4.4 percent to 172.05 rand. With a price-to-earnings ratio of around 25, the retailer is the seventh most expensive stock on the Top-40.

Aspen Pharmacare, a drugmaker that is trading at a hefty 38 times earnings, fell 2.2 percent to 421.52. Aspen has been the top performer on the index over the last 12 months, gaining around 60 percent.

Trade was slow, with 114 million shares changing hands, well below last year’s daily average of 183 million shares.