The unabated exodus of listed companies from the JSE is making it harder for asset managers and investors to diversify their portfolios, placing their financial security at risk, Coronation has warned.
Karl Leinberger, chief investment officer of Coronation, which has R627bn in assets under management, said the delisting trend on the local bourse was cause for concern in the industry.
“It is a consequence of the very cheap valuations, and we expect the trend to continue,” he said.
“It reduces the number of investable stocks on the market, which undermines market depth and an investor’s ability to build diversified portfolios.” More than 20 companies delisted from the JSE in 2022 for various reasons, including M&As. Impala Platinum said this week it will deregister Royal Bafokeng Platinum from the JSE after taking over the company.
Earlier this year, Remgro, which is controlled by billionaire Johann Rupert, delisted its cash cows Mediclinic and Distell; the Mediclinic move came after a takeover by a Remgro-led consortium, and the latter after a merger with Heineken. Technology firm Jasco Electronics exited in March, joining peers Adapt IT and Etion.
Leinberger said that SA equities are “very cheap, with good value across the market — domestic stocks, commodities, and global stocks listed on the JSE”, but he said that Coronation does not see any signs of recovery in the moribund domestic economy.
“We aren’t really seeing any green shoots, other than the possibility that the winter of 2023 might prove to be the peak of Eskom load-shedding,” he said.
The delistings from the JSE has filtered through in the performance of JSE Ltd, the company that runs Africa’s largest stock exchange, which has shed almost R10bn in value in a little more than five years.
On Wednesday, its share price was just under R90 at the close, a dramatic reversal of fortunes from the Ramaphoria-induced high of R200 in February 2018, according to Infront data. The company’s market cap has fallen to R7.9bn from a high of R17.7bn as a result.
New listings have been few and far between in recent years while departures in the small-to-medium cap categories are aplenty.
Christo Wiese’s Premier Foods handed the JSE its first initial public offering (IPO) of the year earlier this year, though similar plans for an IPO by Coca-Cola — mooted in April 2021 — has been shelved until “market conditions become more favourable”, it said
The JSE has reformed its listing requirements to encourage listings, launched actively managed exchange traded funds, and introduced transition- and sustainability-linked bonds to little effect so far. Asief Mohamed, chief investment officer at Aeon Investment Management, said that the delisting trend is also a global phenomenon.
“The delisting is a concern for SA asset managers. About 22 years ago we had about 600 listed companies; today we have just more than 300, and the investable universe for asset managers of significant size is about 60 to 80 listed companies,” said Mohamed. “A number of the companies that are listed on the JSE are extremely cheap, especially SA-centric ones.
“The number of self-inflicted own goals by the government leading to poor economic growth, and the poor corporate governance of listed companies has contributed largely to the derating of SA-centric companies,” he said.
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