Investors blinkered by not so good from South Africa risk passing up on a regular rally, reported by Standard Bank.?
The country’s benchmark stock index slumped 11% not too long ago amid stagnant economic growth, a deteriorating fiscal environment and political upheaval, while the Federal Reserve’s policy-tightening and concerns in 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 for their quarterly writeup on African markets, published on Friday.
Even from a 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, according to data composed 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 has priced into South African equities, therefore we believe this really is overdone,” the analysts said. “We remain constructive to the South African equity market outlook and believe that 2019 will usher in a higher growth path for Nigeria.”
Not everyone agrees. Foreign investors sold an internet R53 billion ($3.9 billion) of South African equities a year ago and now have dumped another R12.1 billion in January. The economy is forecast to cultivate just 1.5% in 2019 following last year’s estimated 0.7% expansion. Investors are usually concerned with President Cyril Ramaphosa’s ability to implement much-needed reforms being an election looms in May.
“Growth-skeptical investors seem like expecting a proper growth recovery,” the normal Bank analysts said. “Even factoring in investors’ more pessimistic growth outlook, we think the industry is overly discounting not so good news, having de-rated more in 2018 than during previous risk-off phases barring the worldwide financial doom and gloom along with the 1998 Asian crisis.”
? 2019 Bloomberg L.P
