Johannesburg - Some market experts are warning investors to be careful when looking at counters listed on the AltX, saying that they should wait for more of a recovery before investing in the bourse.
Since last year's equity market meltdown, which was spurred by a global liquidity crisis in September, the AltX (J232) as a whole has lost approximately 60% in value. This is four times the decline of the JSE's all-share index (J203) which has only lost 15.93%, to trade around 23 286.73 points on June 10 2009.
"Leave the AltX alone. It's much too early to touch it," said Sasfin equities expert David Shapiro, who said there were other counters on the main bourse offering far better value for investors.
Investors have pulled out of small cap shares and developing equity markets over the last 10 months to avoid risk, and invest in safe haven products like cash and gold when markets were seeing a downturn around the end of 2008.
One market watcher from Vestact, Sasha Naryshkine, explained the AltX has "performed poorly" because of some of its biggest listings.
About 27%, or R3.96bn, of the AltX (which has a combined market cap of R14.76bn) is made up of four shares: Pinnacle Point, Esorfranki, Blue Financial Services and Pan African Resources.
The biggest of the lot with a market cap of R1.19bn, Pinnacle Point Group, has seen its share price fall 70.6% from 85c end-August, to trade at 25c at its most recent close.
The second-biggest AltX counter, construction firm Esorfranki with a market cap of R1.01bn, has seen its share take less of a beating than Pinnacle's. Being a construction counter, Esorfranki has benefited from the government's major infrastructure spend plans.
In February 2009, the government announced a R787bn three-year infrastructure spend plan to address the backlog in the country's ailing infrastructure.
Esorfranki's share price has lost 41% over the period since end-August to trade around its most recent close of 375c.
Blue Financial Services, which makes up R906mn of the AltX, experienced big losses in its counter, losing 74% in value from end-August 2008 to trade at about 171c.
Lastly, Pan African Resources (valued at R846mn) has moved marginally, gaining 1c from 79c end-August 2008 to 80c on June 10 2009.
"AltX completely lacks liquidity. It had a terrific time in 2006 and 2007, then it had a shocker of a 2008, and now it's dropped further from those 2008 levels," said Naryshkine.
"I think investors should be careful when they look inside the AltX," he said.
According to Shapiro, companies listed on the AltX "aren't bad... But they need to see a recovery in the main bourse before they themselves start picking up again."
- Fin24.com