Three shares, for all intents and purposes, part of the cohort of so-called ‘SA Inc’ stocks, have seen sustained weakness during August. Two of the three are down by more than 10% over the last 30 days. This is due to certain foreign investors being forced to sell their holdings in MultiChoice Group, Mr Price Group and TFG Limited.
The catalyst for this was the quarterly review of indices by MSCI. In total, there has been an approximate outflow of R7 billion ($360 million) from domestic equities following this rebalancing. In the review, announced in the first half of August, the index provider said these three South African shares would be deleted from its SA Index and, therefore, from the MSCI Emerging Markets Index.
The announcement from MSCI on 10 August meant that any exchange-traded funds (ETFs) or index funds that track the MSCI Emerging Markets Index were forced to dispose of their holdings in these three stocks by the end of last month. By far, the largest ETF that tracks this index is the iShares MSCI Emerging Markets ETF, with net assets of $25 billion (approximately R476 billion).
For comparison, this single fund equates to three times the size of all ETFs, exchange-traded notes, and actively-managed certificates in the South African market. This is an enormous fund.
Selling has been relatively constant from the third week of August. This can be seen in both the general weakness in the prices of these three shares, as well as in trading volumes.
MultiChoice
The average volume in MultiChoice Group over the last 10 trading days (to Friday) has been 6.09 million (daily), versus an average of 2.53 million a day for the last three months. Over the past 52 weeks, the average daily volumes in MultiChoice have been just 1.499 million, meaning that in the second half of August, volumes were more than four times larger. Volumes accelerated from 23 August, with close to 3 million shares trading on each of the next four trading days. By 30 August, the volume was 3.5 million, while 37 million shares were traded on the final day of the month.
The pay-TV operator’s shares are down 14% over the past 30 days, with most of this decline coming from 21 August onwards (when shares closed at R84). Its current levels, below R76, mean the stock is at a fresh 52-week low.
Mr Price
Mr Price Group saw average daily trading volumes of 5.53 million in the last two weeks of August (to Friday), which compares with a level of less than half of this (2.46 million) across the last three months. Its average over the last 52 weeks? Just 1.5 million shares a day.
Shares in Mr Price Group are down 11% over the last 30 days, with a significant decline of 8% on Wednesday. On that day, some data providers show that over 6.6 million shares were traded, with volume of 29 million shares on Thursday.
TFG
Finally, TFG Limited is unique among the three, as its shares have been practically flat over the last 30 days (down between 1% and 2%, depending on the exact range). In fact, its shares are up 2% from the day of the announcement to month-end. There was strong buying on 28 and 29 August. Again, volumes have been substantially higher – 6.67 million over the last 10 trading days versus 3.24 million for the last three months. Its average volume over the last 52 weeks was 2.2 million. One data provider shows that 40 million shares were traded on 31 August.
SA weighting
Effectively, South Africa’s weighting in the MSCI Emerging Markets index has been reduced from Friday (1 September), a further indication of how the JSE continues to lose relevance globally.
The index comprises over 1 400 constituents from 24 emerging market countries.
The changes from 31 August that affected the index were: China: 29 additions, 19 deletions, Greece: 1 addition, 1 deletion, India: 8 additions, 1 deletion, Korea: 4 additions, 2 deletions, Malaysia: 1 deletion, Poland: 1 addition, South Africa: 3 deletions, and Taiwan: 1 addition, 1 deletion.
JSE data shows that offshore investors sold a net R15 billion of equities listed on the exchange last week (R14 billion in purchases, with R29 billion in sales). So far, foreigners have sold a net R89.9 billion of JSE equities (compared with R59.3 billion at the same point last year). In addition, they’ve sold a net R137 billion in bonds on the JSE so far in 2023.