Where to invest in South Africa in 2024

 ·25 Jan 2024

2024 is set to be an uncertain year, but there are still several opportunities to make money.

Mpho Molopyane, chief economist at Alex Forbes, said that this year will be experienced in two halves – the first dominated by the campaigning ahead of the May to August national elections, while the second likely seeing increased capital flows to emerging markets as investors take on greater risk.

“While opinion polls currently show the ANC losing an outright majority over employment, corruption and load-shedding concerns, it is still too early to call the 2024 election results,” said Molopyane.

She said that growth will likely rise from the estimated 0.6% in 2023 to 1.2% in 2024 due to improved self-generation electrical capacity, the easing of load shedding, the recovery in investment sentiment, and increased household consumption amid the decline in inflation and lower interest rates.

“While uncertainty remains a central theme in 2024, a well-diversified portfolio remains essential. Our expectation of a ‘soft landing’ and for interest rate cuts to continue in 2025 points to a favourable backdrop for both bonds and equities,” said Molopyane.

Windows of opportunity

When looking at the upside, a faster-than-expected decline in inflation could result in deeper rate cuts and better-than-expected global growth.

Senzo Langa, Deputy Chief Investment Officer at Alex Forbes, also said that the possible shifts in the global political landscape – with elections in over 60 countries in the world, including the USA, UK and EU – means that it would be advantageous for large South African fund managers keep a healthy exposure to local assets.

This sentiment was shared in the Bank of America’s (BofA’s) latest fund manager survey, where local assets are expected to beat offshore returns.

In the survey, over 45% of respondents said that local bonds were expected to outperform in 2024 – the most of any asset class.

This was followed by local equities (All-Share Index) at just over 30%.

Less than 10% of respondents said that offshore cash and US equities (both in ZAR) are expected to outperform this year.

More specifically, over a 12-month view, resources remain out of favour, with a net bull (expected to rise) of -24.2.

Alex Forbes’ Molopyane said that industrial metals will face headwinds associated with slowing global growth and Chinese demand.

Expectations on gold are contentious, with Molopyane saying that gold should benefit from declining interest rates. At the same time, the BofA survey showed that gold (-18.2) is seen as the least favoured resource.

Fund managers remain bearish on all the resource sectors due to the history of a bottoming process on the resource index, according to BofA.

There is a positive sentiment for the financial sector, with a 6.1 net bull.

Banks (15.1) are seen last as the number one preferred destination in the sector, but real estate (-9.1) remains out of favour.

Overall, the industrials sector is seeing the widest positive sentiment, with a net bull of 18.2.

The general industries and food producers (both 9.1) are favoured the most in the industrials sector, whilst telecoms (-12.1) are the least favoured and losing ground.

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