‘Lion’s share of JSE returns comes from exposure to China, partly via Naspers’
Paula Luckhoff | Pieter Hundersmarck (Fund Manager, Flagship Asset Management) on listed SA businesses’ dependence on China – on The Money Show
- China
- The Money Show
- Bruce Whitfield
- JSE
- Naspers
- Equities
- Tencent
- Business Live
- Global markets
- Pieter Hundersmarck
- BusinessLIVE
- SA equities
Global markets are experiencing extreme volatility and investors are nervous.
However the Johannesburg Stock Exchange (JSE) has experienced some respite through higher resource prices and better terms of trade notes Pieter Hundersmarck (Fund Manager at Flagship Asset Management).
The relatively better performance of SA equities disguises a dirty little secret though, writes Hundersmarck in an article for BusinessLIVE headlined China and the dirty little secret of SA equities.
… the lion’s share of the JSE’s performance comes from exposure to one country, China, through resource stocks and Naspers.
Pieter Hundersmarck, Fund Manager – Flagship Asset Management
Without these two factors SA’s equity performance over the past decade would have been almost 80 percentage points lower than that of the JSE all share.
Pieter Hundersmarck, Fund Manager – Flagship Asset Management
Bruce Whitifield interviews Hundersmarck on The Money Show.
What we found quite interesting in this environment is that the returns on the JSE have made a really great comeback over the past two years and really rewarded investors quite well… but it’s useful to zoom out and look where those returns are coming from…
Pieter Hundersmarck, Fund Manager – Flagship Asset Management
… although we know that Naspers has its biggest asset in China and we know that resources are typically driven by China, I don’t think we actually realise exactly how much of our exchange really is dependent on the returns of one country…
Pieter Hundersmarck, Fund Manager – Flagship Asset Management
If you think of asset allocation as an investor… you should really be careful about putting all your eggs into that one Chinese basket, so to speak.
Pieter Hundersmarck, Fund Manager – Flagship Asset Management
Hundersmarck emphasizes that he’s not saying you can’t make money off the JSE, but that you need to understand where your returns are coming from.
If you zoom out and look at the constituents the JSE really relies on, you understand that 40-50% of all the commodities that are consumed around the world are consumed by one buyer and that’s China.
Pieter Hundersmarck, Fund Manager – Flagship Asset Management
Then if you look at the main asset of the largest company on our exchange and it’s in China… if you take away away Naspers and you take away resources, you end up with a mid-single digit return over the past ten years.
Pieter Hundersmarck, Fund Manager – Flagship Asset Management
The lesson here, he says, is to really have a view on China if you’re going to invest on the JSE.
Listen to the full interview in the audio clip below (skip to 2:30):
This article first appeared on CapeTalk : ‘Lion’s share of JSE returns comes from exposure to China, partly via Naspers’
