{"id":656389,"date":"2023-01-16T11:48:30","date_gmt":"2023-01-16T09:48:30","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=656389"},"modified":"2023-01-16T11:48:30","modified_gmt":"2023-01-16T09:48:30","slug":"one-thing-looking-up-for-south-african-investors","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/656389\/one-thing-looking-up-for-south-african-investors\/","title":{"rendered":"One thing looking up for South African investors"},"content":{"rendered":"

South African equities have an attractive valuation, with most being under-owned and undervalued, says economist Sanisha Packirisamy and head of investment research Herman van Papendorp from Momentum Investments.<\/p>\n

According to the researcher’s latest Market and Economic Outlook for the first month of this year, South African stocks could stand in good stead during potential global equity drawdowns – especially during subsequent recoveries when global risk appetite rises.<\/p>\n

The economists added that there is a lot of bad news that is currently priced into South African equities. However, this enhances the future return potential<\/strong> from current levels.<\/p>\n

“South African equity valuations remain cheap against emerging markets (and even more so against developed markets), with South Africa a superior dividend payer within emerging markets and a large forward price to earnings discount to emerging markets,” said Momentum Investments.<\/p>\n

Momentum pointed to research conducted by SBG Securities that illustrated that apart from insurance, real estate, banks and capital goods, all MSCI South African sectors are currently trading at a discount to MSCI Emerging Markets.<\/p>\n

South Africa’s markets are expected to benefit from Russia exclusion from emerging market indices and investor worries about China’s invisibility within emerging markets due to regulatory overreach, said the group.<\/p>\n

As shown in the graph below, South Africa is likely to benefit from both Russia’s and China’s uncertainty – especially because it is the fifth most under-owned market within global emerging market equity funds.<\/p>\n

\"\"<\/a>As a result of this, South Africa’s market should have “meaningful rerating potential from current cheap valuations when global risk appetite improves,” Momentum said.<\/p>\n

“Our overall expectation is for some rand appreciation as global risk appetite improves later in 2023,” said Momentum.<\/p>\n

“This would erode the local currency returns from global assets. Together with the more attractive valuations available from South African assets that provide a high margin of safety, we prefer South African asset classes over global assets in 2023.”<\/p>\n

Momentum is not the only financial services company predicting positive performance from South Africa’s markets – on 9 January, Jason Swartz, a portfolio manager at Old Mutual Investment Group said that the best return opportunities might be from domestic asset classes going into 2023.<\/p>\n

According to Swartz, South African equities have been undervalued for a while and are a good value compared to equities from both developed and emerging markets.<\/p>\n

\u201cLocally listed stocks have a much better chance of delivering positive earnings growth in the coming year than global counterparts, and these have proven quite resilient in a tough economic environment,\u201d said Swartz.<\/p>\n

Performance<\/strong><\/p>\n

According to DailyInvestor<\/a><\/strong>, local investors in South Africa can expect good news from the equity market.<\/p>\n

The publication compiled the top five stock picks listed on the Johannesburg Stock Exchange (JSE) by industry experts, including:<\/p>\n