Why MTN shares are being hammered, is it a buy?

MTN Group, Africa's largest mobile stock, recently swung to an interim profit. However, the share price was hammered in intra-day trade, leaving investors questioning the future prospects of the company. Richard Baddhika, Portfolio Manager at Tower Capital Management, sheds light on the reasons behind the sell-off and whether it is the right time to buy or sell MTN shares. In a recent interview, Baddhika discussed the impact of global economic factors on the South African market. He mentioned the weakening dollar, strengthening rand, and the implications of the Federal Reserve's decision to start de-gearing its balance sheet. According to Baddhika, a stronger currency can benefit South Africa's economy by masking inflation and potentially leading to interest rate cuts. Shifting to the mining sector, Baddhika highlighted the resumption of dividends by Anglo American and its subsidiary, Kumba. He praised miners for focusing on production aligned with demand, resulting in improved cash flows and debt reduction. However, he warned against reckless spending and production increases that could lead to a glut in the market. Discussing the impact of regulatory uncertainties on mining companies in South Africa, Baddhika criticized the government's policies, which have eroded investor confidence and hindered job creation. He emphasized the importance of favorable policies to attract investment and spur economic growth. Addressing the recent performance of luxury goods retailers, Baddhika mentioned the strong earnings reported by Louis Vuitton Moet Hennessy (LVMH). He attributed the rebound in luxury spending to improved consumer sentiment in key markets like China and Europe. However, the focus of the conversation turned to MTN's declining share price, despite the company's return to profitability. Baddhika pointed out that historical pricing trends and market expectations have led to an overvaluation of MTN shares, resulting in a sell-off. He cautioned investors against buying MTN shares at current levels and advised waiting for a further decline. In conclusion, Baddhika's insights provide valuable perspective on the market dynamics impacting MTN and other key sectors. As investors navigate volatile markets and uncertain regulatory environments, staying informed and cautious is essential to making sound investment decisions.