So far, winds of divestment on South Africa haven't had a ripple on US stocks

The South Africa divestment campaign calls for investors to dump any stock in a company doing business in South Africa. The goal: Coerce corporations into backing out of South Africa by pushing down stock prices. But to date, divestment has not even tweaked stock prices, investment experts say. This despite the passage of measures by 10 states, 30-odd cities, and 73 colleges and universities. So far, an estimated $750 million to $1 billion of stock in public pension and college endowment funds has been sold off.

``It is having an impact in terms of a making a moral or political statement, but it is not something that's having a direct economic impact on the companies involved,'' says Christopher Coon, a researcher at Investor Responsibility Research Center (IRRC) in Washington, D.C. ``It's too small to affect the market.''

In the next six months to five years, however (depending on the expert making the educated guess), the divestment campaign could shove stock prices of companies in South Africa downward.

Money managers estimate that anywhere from $35 billion to $50 billion of stock that could be divested is sitting in public pension funds.

``If this thing really gets rolling, you're looking at $50 billion in pension funds moving out of the South Africa-connected stocks,'' says Dana Strong of the Leuthold Group in Minneapolis. ``That's only 5 percent of total pension fund holdings [and less than 3 percent of total equity holdings], but it's still a significant amount. And if you get mutual funds in on this, it will change the name of the game.''

Others are not so sure. ``We haven't got enough data yet,'' says David Hauck at the IRRC. ``It's the first time we've ever had the potential for a big divestment of stock that has nothing to do with the underlying health of the company.'' But Mr. Hauck thinks mutual funds, instead of joining the bandwagon, will set up South Africa-free funds as alternatives for investors.

In the ``worst possible case,'' Andrew Rudd, managing director of Barra, a Berkeley, Calif., financial consulting firm, calculates that the price difference between stock in South Africa-tied companies and non-South Africa companies could be about 11 percent. He adds that a 2 to 3 percent price difference is more probable, but even that much effect is unlikely.

If the prices of blue-chip companies in South Africa are depressed, fund managers without any buying restrictions are likely to purchase these ``bargains.'' A stock selling at a lower price with the same dividend payout will raise the dividend yield, thus setting off bells on portfolio managers' computers. So any imbalance in stock prices might be quickly righted.

Also, if the selling is spread over a long period or is done when buying demand is strong, there may be little effect on a stock's price.

Investment managers have a different agenda than divestiture proponents do. A quick divestment that pushed the price of a stock lower would also reduce a fund's return. So, ``If left in the hands of the fiduciaries, they will do this with as little disturbance as possible,'' says Wayne Wagner, chief investment officer of Wilshire Associates, in Santa Monica, Calif.

Since many divestment plans call for a rising percentage of South Africa-related stocks to be sold each year, ``the most onerous part of divestment will be felt'' in about five years, Mr. Wagner thinks.

It isn't the selling that will affect stock prices so much, contends Patrick McVeigh at Franklin Research and Management in Boston. ``Over a five-year period, the majority of stocks are rotated out of a portfolio anyway. But the question is, will divestment affect demand for a stock and act as a depressant on the price?''

Another important factor to money managers is whether divestment policies will boost the stock price of companies not in South Africa. Money shifting out of South Africa ``could be a boon for secondary issues,'' says Mr. Strong. But he allows that divestment is going to have ``to gather a lot more steam before you see any significant advance in secondary stocks.''

Even if South Africa collapsed tomorrow, the financial effect on the companies there would be minimal. ``Most companies in South Africa have less than 1 percent of their total assets in South Africa,'' Strong says. ``The loss of sales would cause far less damage than inflation in one year.''

``It is real hard to draw any conclusions at this point'' about the affect of the divestment campaign, says Wagner at Wilshire. For now, he and other money managers are simply tracking prices, ready to jump on or off the boat should the winds of divestment begin to disturb the market.

Second of two parts.