RETAILERS experienced their biggest one-day fall on the JSE in almost a year on Friday, on negative sentiment towards SA following the deadly labour dispute at Marikana, one of the country’s biggest platinum mines.
“As it is exclusively South African stocks, it may be that Lonmin has scared a few foreign investors,” says Byron Lotter, a portfolio manager at Vestact. “It’s not a long-term thing.”
The general retail index was 3,9% lower at the close of trade on Friday, its biggest percentage fall since September 22.
South African retail shares have been trading at record highs this year, driven by foreigners looking to Africa for an alternative as the sector slows down in Europe and the US. Among the weakest retail stocks were the fashion houses, with The Foschini Group’s (TFG’s) shares falling 5.9% to their lowest in a month. Truworths fell more than 5%.
Michael McLeod, an analyst at Avior Research, said he had expected a possible pullback in retailers, given their strong run.
“We believe that slowing earnings may trigger a switch among investors to other areas of stock markets, such as resources, which look cheap from the valuation point of view. However, it is still early stages to determine whether this is a trend.”
Over the past 12 months, shares in TFG have gained 52%, while those of Mr Price, a mainly cash retailer, have risen 73%. Shoprite, Africa’s biggest grocer, has risen 48%.
“It is too early to be sure, but perhaps we are seeing a sector switch from areas of the market like retailers which are now looking a little more expensive to those which appear relatively cheap,” Shaun Murison, market analyst at IG Markets SA, said.
Shares that have been underperforming for long periods are starting to offer value, he said.