The JSE All Share (J203) index first broke through the 50,000 level during early June 2014. The 5,000 point rise from 45,000 to 50,000 had taken just under 6 months. Since then the JSE has breached the 50,000 level on three occasions, and only topped 55,000 once. For most of the last 3 or so years it has traded range bound between 50 and 55 thousand points, seemingly going nowhere. The million Rand question is where to from here for South Africa’s major equity index?

This nebulous situation is further compounded when you look at the performance of Naspers (NPN) over s similar period. It must be remembered that this heavyweight stock accounts for close on 20% of the index. Over a similar period Naspers share price has been on a steady march that can best be characterized as being onward and upward. The JSE All Share would have been all the worse off, if it had not been for the steady support of Naspers.

The JSE can broadly be broken up into 2 classes. There are the Rand hedged juggernauts such as Naspers, BAT, Billiton, Anheuser, Richemont and the like. These shares earn all or the major bulk of their earnings from offshore sources and are not really dependent on the vagaries of the South African economy. They are relatively few in number and are extremely popular amongst the fund and portfolio managers. Then there are the shares that are materially exposed to South Africa and its economy, such as the retailers, industrials and the banks. These latter shares are often referred as SA Inc, and unsurprisingly have not had the best of times of late.

For the trend to change, one has to ask the question: What is going to be the catalyst that will stimulate growth in South Africa and result in these shares that make up SA Inc to prosper? The world economic forum recently re-iterated its stance that South Africa’s economy will grow at a dismal 0,5% for the 2018. With the current social and political uncertainty there is not much to hang your hat on. A diversified offshore blue chip portfolio seem like a far more prudent course of action for the long term investor.

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