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I thought @Lindon's wider point was that external investment sentiment in SA has not changed for the positive that much and continues to deteriorate. This despite Ramaphosa's investment conference.
If we look from an outsider's perspective perhaps, what exactly has changed in SA in the 21 months he has been in power. Are there any big corruption trials ?, have large swathes of ANC thieves been brought to book for their mismanagement and in many cases outright thefts and corruption ?
Just looking coldly and knowing not a lot, it is not hard to see why sentiment has not changed. In a very similar way, we rail against the injustice of the current MCAP, but from outside in between bottles of bolly, why is an II or fund manager gonna say 'sure bet' ... they don't know what we know and can't be arsed to find out until the clues are rammed down their throats.
I did not read Lindon's post as a criticism at all, just a reminder that there are other factors at play.
Thank you RazorShultz. I really do appreciate input from someone with clearly a greater working knowledge than myself.
Regards. Pdub.
Hi Pdub, yes I believe you're entirely correct in saying that. Lindon's original post might have been clearer about what he was actually criticising, in that aspect.
Lindon nice try but those same rules require only one of the two main ratings agencies to have investment status. And Moody's still has.
Your post misled the market in my opinion. You should apologise.
RazorShultz very much appreciate you taking the time for answering.
However in a way you have made my point. Many institutions don't invest in AIM companies ... period. That has nothing to do with the investment climate in SA which is what Lindon was trying to make out. Lindon in my opinion is misleading investors into thinking that SAs performance is preventing investment in BMN because of the rules. The reality has nothing to do with that. It is because BMN are on AIM that many institutions can't or won't invest, and that would still be true even if SAs economy was booming. Correct?
Does that apply to physical or listing location Lindon / Razorshultz?
Pdub.. as I’m sure your aware there loads of info on the net on how investment fund managers are prohibited from investing in companies that operate in territories which have been given ‘Junk Status’ and are even required to sell up existing holdings if that happens.... which is vary expensive exercise and may deter mangers from investing if they perceive there is risk that mIght happen
Briefly Thus:
Junk status: This is a level of credit rating. The easiest way to understand it is to think of South Africa as if it’s a person. If a person doesn’t pay their debt, it becomes more difficult for that person to get credit in the future. Fewer lenders would be willing to give them credit, and those who do would charge higher interest rates. That is, essentially, the position that South Africa will be in.
Mandate: A person who manages investment funds may be bound by certain rules that guide them on how and where those funds can be invested. This is known as a mandate, and many mandates allow fund managers to invest only in countries with a higher credit rating. So, when a country is downgraded to junk status, many investors are required to pull out funds from that country’s shares and bonds, even if they might not want to.
Hi Pdub, I can in part answer one of those questions (at the risk of exposing myself to attack!). I won't defend his assertion that this is "contributing to a low share price" but I can certainly explain why "most institutions are unable to invest in BMN". By most institutions I believe he means fund managers, and the simple answer there is a regulatory one - funds have to invest in assets consistent with the fund's risk profile. Most funds simply do not invest in AIM companies for this reason. Of course there are actively managed small-cap funds, funds for special situations, and then there are venture capitalists, hedge funds etc, who may be more than happy to support/short BMN.
Ultimately, I think it's actually pretty reasonable to say most institutions can't/won't invest in BMN, as it currently is. As for your requirement for an explanation from a professional or well-researched perspective, I'll pick the professional option given I work at a large investment company myself (think along the lines of Aviva, Legal&General, etc). I hope that helps simmer things down a little!
Lindon I have some questions for you that arise from your post at 08.32 this morning:
"Yes, quite true Hammill23... the problem of the deteriorating investment outlook is that fund rules prohibits the majority of institutions from investing in BMN shares even if they want to... and that rather noticeable lack of buying power despite the all the recent good news...could well be what is contributing to our low sp!"
I must explain that I am no expert in this field but i assume you have the answers, given your suggestion that Institutions can't invest in BMN and that is contributing to a low share price. This is a very bold and original assertion and a therefore I assume that you have not just made it up!
First, as Moody's still have Investment Rating for South Africa, albeit negative, it is NOT junk status. Therefore why are 'the majority of institutions' (your words, not the article's) unable to invest? Please explain. To me that sounds misleading.
Second. BMN are listed on the London AIM market, not South Africa, and registered in Guernsey, not South Africa. Please explain to me even if SA was given Junk Status how that would affect investment in a London listed company.
I don't want uninformed opinion and guesswork, I can do that myself. I need you to explain the reality of these two situations from what is a professional or well researched perspective. You have suggested that the company in which I have invested a large part of my savings is currently in a position where it's share price is low because the majority of institutions are not allowed to invest in it. I am challenging you to prove that point or withdraw your comment and apologise for potentially misleading the market.
I will put aside the fact that you attacked me earlier for challenging your negativity, as this is a much more serious issue if you have indeed mislead the market.
BMN will stand out from the crowd re JSE listing in 2020, I expect investors will want to be getting onboard the BMN train as the story is so compelling, especially if the Rand weakens even more.
Lindon's not a troll James he is just mentioning this for discussion.
However If our biggest investment to the company will come from the World Bank/VRFBs then the SP will take care of itself.
Lindon that is why we need a JSE listing to get investment from within SA.
Sorry... Hamill
Also here’s the link to that article.
https://www.fin24.com/Economy/sas-junk-spiral-may-deepen-as-sp-likely-to-cut-outlook-20191118-2
I wonder if negative comments on a bb at opening on a Monday have a similar impact? Just a thought.
Yes, quite true Hammill23... the problem of the deteriorating investment outlook is that fund rules prohibits the majority of institutions from investing in BMN shares even if they want to... and that rather noticeable lack of buying power despite the all the recent good news...could well be what is contributing to our low sp!
Lucky Bushveld is cash rich and doesn’t have to go begging :) maybe why they agreed loans in Rand.
SA's junk spiral may deepen as S&P likely to cut outlook Nov 18 2019 07:00
South Africa could move deeper into junk territory as the nation looks set to lose the only stable outlook on its credit ratings this week.
In a Bloomberg survey, 86% of economists said Moody's will take South Africa to junk next year, compared with 27% who said in a survey before the mid-term budget that the country will be sub-investment grade by the end of 2020. More than half of those who now say the country will be sub-investment grade with Moody's in 2020 forecast it will happen within the first six months.
A Moody's downgrade would force South Africa out of the FTSE World Government Bond Index, which could prompt a sell off and outflows of as much as $15bn, according to Bank of New York Mellon. It will also raise borrowing costs and make it even more difficult for government to finance the budget.
"The agency has so far demonstrated an incredible, and frankly quite unjustifiable, reluctance to cutting South Africa's ratings to junk," said Cristian Maggio, head of emerging-market strategy at TD Securities.
"Confronted with a horrendous revision of all fiscal targets now, and in the absence of any significant positive revisions, Moody's will haven no option but to align with S&P and Fitch and cut the ratings."