Hotel operator Tsogo Sun Holdings, electronics group Reunert and explosives and chemicals maker AECI Ltd are among stocks PSG holds because they fit its description of \u201cuncrowded\u201d assets, where prices and expectations were low. \u201cThere\u2019s generally going to be less competition in those places,\u201d said Greg Hopkins, the asset manager\u2019s chief investment officer.<\/p>\n
The benchmark index was 1.3% lower Friday, largely in line with emerging-market peers. Sentiment toward South Africa-focused shares may improve as Zuma\u2019s expected departure sparks optimism that new leadership will follow more pragmatic and predictable economic policies. Business confidence rose to the highest level since October 2015 last month.<\/p>\n
\u201cIf the good news persists and continues from here, we think many South African assets could still do well,\u201d Le Roux said. \u201cA really good opportunity is some mid- and small-caps that have been left behind. We see that as the most fertile ground for hunting at the moment. There are still good opportunities and we\u2019ll certainly wait patiently for prices to reach fair value.\u201d<\/p>\n
Here are some further views from PSG and other investors<\/strong><\/p>\n PSG\u2019s Le Roux on Johannesburg-listed health-care stocks and the balance between \u201crand-hedges\u201d that benefit in the local currency and domestically focused shares:<\/em><\/p>\n \u201cHealth-care stocks are victims of some very poorly timed and miscalculated foreign acquisitions. They rushed to take money offshore and shareholders have not been well-served by the acquisitions they\u2019ve made and the chickens are coming home to roost.\u201d<\/p>\n \u201cI don\u2019t think there\u2019s been one good offshore acquisition in that sector and there\u2019ve been a lot.<\/p>\n “They\u2019re very good businesses, they\u2019ve got strong pricing power, they generate cash. We would prefer if that cash would come back to shareholders, rather than be wasted in offshore markets.\u201d<\/p>\n \u201cIn an environment where it looks to us the average South African investor is still positioned for rand weakness, we could be looking at one of those long periods where it\u2019s very uncomfortable to own rand hedges and to be underweight domestic assets.\u201d<\/p>\n Simon Raubenheimer, who helps oversee about $45 billion as a money manager at Allan Gray in Cape Town:<\/em><\/p>\n The market reacted \u201cextremely aggressively\u201d to political changes and has priced in a lot of the good news. \u201cWe do find examples of stocks that we are pretty optimistic about, especially on a relative basis, but you\u2019ve got to dig pretty deep to find these opportunities.\u201d Shares that \u201cfell through the cracks\u201d of the December-January rally and offer value include Investec, which he said has lagged other South African banks.<\/p>\n Health-care stocks are looking relatively cheap in historical terms and compared with the market. Sasol, Old Mutual Plc and British American Tobacco Plc are among others becoming attractive.<\/p>\n Soledad Lopez, an emerging market strategist at UBS Group AG in New York:<\/em><\/p>\n The bank upgraded South Africa to \u201cmost preferred\u201d in its dedicated emerging-market portfolio in January, with the expectation of a lower risk premium after the ANC leadership elections.<\/p>\n \u201cWe see a higher probability of higher growth and an improvement in business and consumer confidence that will be supportive of financial markets. Structural reforms and fiscal discipline will be needed, but sentiment will likely improve in the coming months.\u201d<\/p>\n
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