Blue Chip Issue 90
Blue Chip Journal – The official publication of FPI Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry.
Blue Chip Journal – The official publication of FPI
Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry.
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BLUE<br />
CHIP<br />
On the money<br />
Making waves this quarter<br />
JSE de-listings<br />
PORTFOLIO IMPLICATIONS OF JSE DE-LISTINGS<br />
The increased number of companies de-listing from the JSE has elevated<br />
investor concerns about the investment outlook for SA Equities. The<br />
shortage of new listings, the relatively weak performance of local shares<br />
and depressed levels of business confidence have further exacerbated<br />
fears among market participants. While the de-listing trend is concerning,<br />
the debate is less about the number of de-listings and more about the<br />
level of market concentration and its impact on investment portfolios.<br />
De-listings have had minimal impact on JSE trading and liquidity<br />
given the high levels of index concentration and size of the main index<br />
constituents. The direct impact of smaller companies exiting the market is<br />
also less meaningful when viewed through the lens of how equity funds<br />
are currently constructed.<br />
Most of the companies that have de-listed were not core holdings in<br />
benchmark cognisant domestic equity portfolios. Approximately 70% of<br />
de-listings over the last five years would be categorised as small-cap or<br />
fledgling companies with market caps of less than R300-million, placing<br />
them outside the investable universe of fund managers tracking the<br />
index. There are exceptions but, on average, domestic equity funds<br />
holding the majority of pension and retirement assets have remained<br />
unaffected by the shrinking opportunity set. In aggregate, investors<br />
have already been allocating capital as if the market is narrower than<br />
it is.<br />
By Sean Neethling, Head of Investments at Morningstar South Africa<br />
. .,,01,.\W of Cope<br />
l:.<br />
(U)ucr Law@work<br />
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