S.Africa's Mr Price joins blue-chips, shares rise
* Mr Price shares up 3 pct
* Promotion reflects 50 pct surge in shares YTD
* Changes to take place on Sept. 25
JOHANNESBURG, Sept 18 (Reuters) - Shares in Mr Price Ltd rose more than 3 percent on Tuesday after the Johannesburg Stock Exchange (JSE) said South Africa's third-biggest listed clothes retailer would join its blue-chip index next week.
Mr Price, which is valued at 29.7 billion rand ($3.62 billion), rose 3.16 percent to 122.24 rand by 1433 GMT, extending gains so far this year to more than 50 percent.
South African retailers have been the darling of investors in recent months despite domestic analysts' warnings their share prices have risen to levels from which they can only disappoint.
"Mr Price, as well as most major retailers, is hopelessly overvalued but because its market cap has reached a certain level, it qualifies for inclusion in the index," Syd Vianello, an analyst at Nedbank Capital, said.
Vianello said foreign investors, benchmarking the sector against little or no growth in developed markets retailers, have been the primary drivers of share price rises.
A Reuters consensus of 11 analysts rates the stock - which trades at 20 times its forward earnings - as "underperform". Four analysts have a sell rating on it.
More than 40 percent of Mr Price shares are held by foreign investors.
Mr Price is replacing mass market lender African Bank Ltd in the JSE Top-40 index. African Bank, whose share price is virtually unchanged this year, would be demoted to the JSE mid cap index.
The changes will take place from September 25, the JSE said after its quarterly index review. ($1 = 8.2075 South African rand) (Reporting by Tiisetso Motsoeneng; Editing by Ed Cropley)
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