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Telkom Slumps Before MSCI Index Exclusion: Johannesburg Mover

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May 31 (Bloomberg) -- Telkom South Africa Ltd. declined to the lowest in more than eight years as investors sold shares before the company’s exclusion from the MSCI South Africa Index tomorrow.

Shares in Africa’s biggest fixed-line operator dropped as much as 6.6 percent and closed 4.9 percent lower, the biggest decline since Sept. 29, at 22.91 rand in Johannesburg, the lowest since October 2003.

Telkom will be removed from the South Africa index at the close of trading today, MSCI Inc. said on May 15. Assore Ltd., a mining holding company, and Mr Price Group Ltd. will be added to the stocks gauge. Shares in Assore jumped 2.3 percent, taking gains for the month to 5.7 percent. Mr Price added 3.2 percent to the highest close in more than two weeks.

Telkom’s 21 percent slide this year meant the company’s market value probably made it too small to be included in the index, Rhynhardt Roodt, an analyst at Cape Town-based Investec Asset Management, which manages more than $90 billion, said by phone. Telkom is valued at 11.9 billion rand ($1.4 billion) and has the smallest weight on the MSCI South Africa Index at 0.28 percent.

“Mainstream foreign investors do tend to focus on those shares that are in the major indices,” Roodt said. “They attract more investor interest, so more money flows that way and it has a positive effect on the rating of the company.”

Stephen Gunnion in Johannesburg at +27-11-286-1936 or sgunnion@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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