• October 24th, 2020

NSX ‘bloodbath’ was great opportunity for institutional investors

The local index of the Namibian Stock Exchange lost an astounding N$6.5 billion in market capitalisation one day of trading last week, which was, however, quickly regenerated in subsequent trading. Local stock brokers and economic analysts, who described last week’s major selloff of shares as a “bloodbath on the Namibia Stock Exchange”, pointed out the shares were sold at lower than market prices, which meant they were quickly gobbled up by institutional investors, who move in to recapitalise the local bourse. 

The ‘bloodbath’ comment first came on social media from co-founder of Cirrus Securities Rome Mostert, who noted that NSX’s local index was down, almost 20% on daily trading. This Mostert noted was due to Namibia Breweries (NBS) shares falling close to 25% to N$25.90 in trading, FirstRand Namibia (FNB), which was down 35% to N$20.14 and the Capricorn Group (CG), which fell 24.9% to N$10.50.
Responding to questions from New Era, an analyst at Cirrus Securities, Jaco Schoombie, pointed out that the NBS and FNB trades were a result of a large foreign shareholder needing liquidity in their fund. 

“Due to them likely needing the money urgently, they were willing to sell the shares at a significant price below market prices to make it appealing to potential buyers. NBS and FNB traded back up on Friday, but the volumes of the trades on Thursday were significantly higher than what traded them up again. NBS is above where it was before the large trades occurred on Thursday, whereas FNB traded up to N$23.00,” Schoombie explained. 

“There were no other trades with the same volume but the price movements certainly created some noise,” said Schoombie, adding that: “Some of the shares are more attractive; however, we still await the latest financials to see what the impact of Covid-19 and the subsequent lockdowns are on these companies”. 
When asked if the valuations of locally-listed companies were affected at all, Schoombie stated: “We await the release of the latest financials before we revisit our valuations”.

Meanwhile, CEO of Sanlam Investments Tega Shiimi ya Shiimi echoed Schoombie’s analysis, saying: “Although there was a major selloff, the markets quickly returned with NBS up 33%, CG was up 3.5% and FNB was up 15%”. 
He also confirmed to New Era that the major selloff was caused by the United States of America-based private equity firm, called SQM, strategically leaving Africa. 
“Valuations indicate that these are still fundamentally good companies. There were no real serious conspiracies. It was a great buying opportunity for local institutional investors,” Shiimi ya Shiimi concluded.  
– ebrandt@nepc.com.na

Edgar Brandt
2020-07-24 10:16:42 | 3 months ago


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