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South Africa: My Ten Cents’ Worth – Why We Shouldn’t Be Surprised By the Drop in Naspers Shares

south africa my ten cents worth why we shouldnt be surprised by the drop in naspers shares
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The rapid decline in Tencent’s share price over the last two weeks has been arrested, but this will serve as small consolation to South African investors in Naspers, who naively believed that the only direction the Chinese tech phenomenon was headed was up.

First published in the Daily Maverick 168 weekly newspaper.

Naspers, whose 29% shareholding in Tencent accounts for about 82% of its underlying net asset value, has fallen in sympathy with Tencent, declining by 28.3% from its February high. The fact that Naspers’s share price is 28% lower, while Tencent’s is 36.7% lower than it was in February, has more to do with rand depreciation than anything else, explains Anchor Capital’s Mike Gresty.

While it is easy with hindsight to say “I told you so”, the risks of investing in Naspers – or more specifically China – have been evident for some time, but investors tend to ignore risks when the share price is headed north, along with every other tech company in the world.

Let’s face it, China is not a democracy. Far from it. The Chinese Communist Party (CCP) has embraced market reforms and opened its economy because it suits it to do so, not because…