The Johannesburg Stock Exchange (JSE) had a strong year in 2019, strengthening by 8.24% over the last 12 months.
This is good news for local investors who have been struggling to achieve strong gains on the JSE over the last 5 years.
While the overall performance of the JSE was positive, local telecommunications and IT companies did not perform well.
Telecoms companies were particularly hard hit, with Telkom losing 45% of its value in 2019.
Casparus Treurnicht, a portfolio manager at Gryphon Asset Management, explained that Telkom’s share price decline is partly link to its strong run between July 2018 and June 2019.
The share is now giving back these gains as investors realise how capital intensive the telecoms industry is.
“If you are taking market share it also means you need to upgrade infrastructure to handle the additional volumes,” Treurnicht said.
He said although Telkom is expanding margin due to the fixed-cost element decreasing, sustainable margins in the industry seem to be under tremendous pressure.
Other telecommunications companies were also hard hit, with Blue Label Telecoms losing 52% and MTN and Vodacom losing 7% and 13% respectively.
The biggest winner and loser
It was, however, not doom and gloom for all tech companies. Cartrack gained 69% over the past year, making it the best-performing tech stock on the JSE.
On the other side, EOH lost 59% over the past year after it was hit by corporate governance problems.
Cartrack – Up from R14.30 to R24.23 (+69.44%)
EOH – Down from R30.82 to R12.53 (-59.34%)
The graphs below show the performance of the four main telecoms shares over the past year. Blue Label can be seen as representative of Cell C, as the company’s largest shareholder.