Call it the curse of unintended consequences. When Naspers lists on the Amsterdam exchange in the next few months, SA tracker funds could under some circumstances end up being obliged to buy more shares. This is precisely the opposite of what was intended.
Naspers’ stake in Tencent accounts for the entire value of the company, plus about 20%, which could imply that everything the company does other than holding a stake in Tencent is worth less than nothing. Or it could imply that shareholders of Tencent are absurdly hopeful and are overvaluing the company massively.
Because of Naspers’ increasing weight on the JSE, over the past few years, many South African pension funds and investors have moved their domestic equity benchmarks to this measure from the JSE SWIX All-Share Index. Even with the change, most funds are overweight the stock, meaning they have a larger proportion of the stock than the benchmark suggests they should.
But if you are concerned about a balanced fund which is not too heavily dominated by a single stock, then it is a problem. With the split of Naspers into two instruments, the 18% Naspers weight will stay capped at 10%. However, the addition of the 6% Prosus weight in the index means that the Capped SWIX will effectively hold up to 16% combined exposure to Naspers,” Hulett adds.
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