Foreign investors have increased their exposure to certain precious metal shares over the past year, according to an analysis of SA equities by Bank of America Merrill Lynch Global Research.
This is in spite of the general distress among SA’s precious metals producers as the industry struggles with rising costs and ageing gold assets and a low platinum price.
In a report, released on Thursday, the bank’s research arm said SA’s equities in general are 52% foreign-owned as of March 2019, an increase of 0.5 percentage points compared with April 2018. More specifically, SA’s mining stocks are 62% foreign-owned, up from 60% in 2018. Industrials are 54% foreign-owned, compared with 55% in 2018, while financials are unchanged at 37%.
In the resources category, foreign investors have bought up shares of four precious metal mining companies — Impala Platinum (+11.1 percentage points), Anglo Platinum (+5.1 percentage points), AngloGold (+6.8 percentage points) and Gold Fields (+6 percentage points).
Resources also dominated the top five foreign-owned SA stocks, which are Richemont, BHP, Gold Fields, Harmony and AngloGold.
Peter Major, director of mining at Mergence Corporate Solutions, said there are different reasons for why foreigners would grow their investment in each of the four precious metals miners.
They would be as keen to buy into Amplats, given it is the world’s most profitable platinum producer with the majority of earnings coming from its Mogalakwena open-pit platinum mine in Limpopo, Major said.
Meanwhile, “If you are buying Impala Platinum, it’s mainly for the gearing [towards a higher platinum price], and a hoped for effective restructuring,” said Major. Although Sibanye-Stillwater is also highly geared, it is much more difficult to analyse, he said.
An increase in foreign ownership of Gold Fields and AngloGold shares is no vote of confidence in SA, given that the assets of these two companies are mainly outside of the country.
Although the research report said some Harmony stock was offloaded (-2.5 percentage points), it is very popular among foreign investors despite its near total exposure to SA. Major attributed this to niche group of “international gold bugs” among the global investment community which were always keen to invest in the riskiest, most geared SA gold stocks.
The bank, in its report, further found foreigners investors had increased exposure to equity investments, property, and financials. At the same time, they reduced their exposure to a number of sectors and the biggest losers were Dischem, Coronation and Vodacom, followed by Imperial, MTN and Woolworths.