Blinded by bad news, investors may miss SA stock rally

Investors blinkered by not so good news from South Africa risk missing out on an investment rally, in accordance with Traditional bank.?

The country’s benchmark stock index slumped 11% during the past year amid stagnant economic growth, a deteriorating fiscal environment and political upheaval, although Federal Reserve’s policy-tightening and concerns above the US-China trade dispute also weighed on emerging-market stocks.

But equities are positioned for just a recovery in 2019 as the economy gathers momentum, Traditional bank analysts including Chief Economist Elna Moolman said inside their quarterly look at African markets, published on Friday.

Even from 7.2% rally since mid-December, the FTSE JSE Africa All Share Index remains near its cheapest in accordance with emerging-market peers in almost seven years, in line with data published by Bloomberg. That’s too pessimistic, given a recovery in consumer spending, healthier household balance sheets and improving consumer confidence, the analysts said.

“A worst-case growth scenario will be priced into South African equities, and now we believe it is overdone,” the analysts said. “We remain constructive within the South African equity market outlook and believe that 2019 will usher from a higher growth path for Nigeria.”

Not everyone agrees. Foreign investors sold a web R53 billion ($3.9 billion) of South African equities recently and also have dumped another R12.1 billion in January. The economy is forecast to build just 1.5% in 2019 following last year’s estimated 0.7% expansion. Investors will also be focused on President Cyril Ramaphosa’s opportunity to implement much-needed reforms as an election looms in May.

“Growth-skeptical investors seem to be awaiting an absolute growth recovery,” the common Bank analysts said. “Even factoring in investors’ more pessimistic growth outlook, the world thinks the market industry is overly discounting not so great news, having de-rated more in 2018 compared to previous risk-off phases barring the international financial doom and gloom additionally, the 1998 Asian crisis.”

? 2019 Bloomberg L.P

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