JSE winners from Covid-19

The JSE doesn’t have an equivalent index or range of the well known global leaders that have driven the Nasdaq Index to new highs as opposed to the S&P 500 and Dow Jones components which, although they have had a spectacular recovery since mid-March, will be much more susceptible to a pullback should a second wave of Covid-19 infections stall the expected economic recovery.

Naspers and Prosus are, however, the standout exceptions with their investment in Tencent which increased its hold on its Chinese users with its growing range of games and other products during the Chinese lockdown. In addition, Prosus is optimistic that growth in food delivery will be further enhanced long term by Covid-19.

To this, one could add gold stocks which are likely to benefit from the unprecedented levels of global liquidity created by central banks. Even here, however, the deep level underground mines are still a way off reaching pre-lockdown production levels. This applies to Harmony, see table below, whereas AngloGold operates mainly outside South Africa.

Meanwhile most other JSE stocks reflect the vast swathe of destruction wrought by the lockdown with non-food retailers, REITS, transport and other SA Inc. industrials being obvious examples. Again, on the mining side there are a few exceptions, such as Kumba, whose open cast operations have recovered more rapidly and which have benefitted from a boost to the iron ore price caused by Covid-19 related setbacks to Brazilian production.

Telco’s are another exception as they have benefitted from the enormous increase in online meetings and data consumption but also have other challenges with MTN’s array of developing country exposure – the latest issue being US litigation based on allegations of collusion with the Taliban in Afghanistan.

Pharma distributors benefitted from no lockdown but couldn’t sell other products which led to Dischem arguing for rental reductions from landlords. Clicks has regulatory challenges around its manufacture of certain generic products. Aspen, on the other hand, has been in deep trouble in recent years due to over indebtedness but is benefitting from enhanced demand.

The same applies to tech stock EOH which, prior to Covid-19, had been rocked by over indebtedness and discovery of corruption in certain subsidiaries but which is now benefitting from sustained demand for its products under Covid-19.

Apart from stand out winners from Covid-19, there are several other stocks which one could perhaps term “early recovery” situations such as Afrimat and Raubex both of which have mentioned the probability of benefitting from government expenditure on infrastructure to re-stimulate the economy.

The list of exceptions and partial exceptions goes on, all of which indicates that Covid-19 will continue to give surprises in the months ahead.