Johannesburg - South African stocks
retreated from a record high on Friday, edging down half a
percent after retailers Shoprite and Woolworths
declined on concerns their valuations may be stretched
from a recent surge.
Shares of Investec fell nearly 1% after the
investment bank and asset manager said it would pay about $42m for unlisted Irish financial firm NCB.
Lower-than-expected US growth data also blunted appetite
for equities, especially in South Africa, where the broad
All Share [JSE:J203] index on Thursday finished above 34 000 for the first
time in its 17-year history.
"We are in overbought territory," said Mitchell Gannaway, a
trader at Thebe Stockbroking.
"The US GDP figures, slightly below expectations, ... gave
people a reason to do a bit of selling."
The All Share index finished down 0.5% at
33 895.02. On Thursday it posted a record high of 34 079.54.
The benchmark Top 40 - (Tradeable) [JSE:J200] index declined 0.6% to
30 324.28. On Thursday it hit its highest since May 2008.
Shares of Shoprite Holdings fell 1.5% to R129.63. The
discount retailer is trading at a lofty 26 times earnings,
making it one of the most expensive blue chips in Johannesburg.
Upmarket rival Woolworths Holdings slid 0.8% to R41.89. After surging 45% in 2011, shares of Woolworths are
up nearly 8% so far this year.
It currently trades at just short of 20 times earnings,
compared to the average of 13 times for Johannesburg.
South African retailers have surged due to strong earnings
and expectations of further expansion into fast-growing Africa,
but some investors believe the stocks are now too expensive.
"In the short term, the market buys themes and stories...
Globally, there is huge appetite for emerging markets. What do
you buy in emerging markets? Well, you buy growth," said Piet
Viljoen, executive chairman and portfolio manager at asset
managers RE:CM in an interview with Reuters last week.
"It seems that South African retailers have growth. You can
justify that on the basis of the story, but if you look at the
numbers it's hard to justify, if you look at the underlying
value it's very difficult to justify."
Charts also indicate that Africa's biggest equity market may
be overheated.
The All-share's 14-day RSI, or relative strength index, is
hovering just below the overbought 70 mark. It is also trading
near its upper Bollinger band, both potential sell signals for
technical analysts who look to charts for trading signals.
Investec fell 0.8 percent to 48.60 rand. The bank has agreed
to buy Irish broker and wealth manager NCB for around $42
million in cash, although it said it could issue shares to help
fund the deal.
Trade was thin, with just 167 million shares changing hands
according to preliminary exchange data, compared with last
year's daily average of 256 million shares.
Decliners outnumbered advancers 145 to 137, while 76 shares
were unchanged.