18 Aug 2014 Sentiment on social media turns negative for Capitec!
Capitec’s share price is coming under pressure after Moody’s downgraded Capitec’s debt rating to junk status. The share price dropped from R243 to R203 in two weeks after the demise of African Bank (Abil) and the rating downgrade.
Topsy measures social sentiment and rates millions of microblogs (mostly tweets) as positive or negative. Strong relationships have been found in research between social sentiment and future price movements. While Abil collapsed, the social sentiment of Capitec stayed above 50% positive. It has since dropped to only 7.3% positive over the last 7 hours (see picture). Tweets per day shot up from 150 to 800.
This may well present a buying opportunity (not advice, opinion only) as rating agencies are notoriously unreliable. In 2008 rating agencies gave Lehman Brothers a clean bill of health weeks before the Bank collapsed. Now they overcompensate. Capitec’s provisions are a lot more conservative than Abil’s. Capitec’s credit loss ratio is steady at 12.5% compared to the 25% of Abil. They also do not own a retailer making a loss of R1,7bn in this year (Ellerines).
You can watch my video presentation for the JSE Power hour on “Using the power of social media in the market” here: http://www.justonelap.com/default.asp
Head Sanlam iTrade.
Disclaimer: Nothing in this Post must be construed as advice or promotion to buy or sell investments.