Now’s not the time to be rushing offshore as the winds of change at home are expected to blow welcome growth into all SA asset classes.
This is the view of Old Mutual Investment Group’s head of macro solutions Peter Brooke, who adds that conditions at home are so bad they can only get better, while the inverse is true for the US.
As proof of his convictions, Brooke told a gathering in Sandton this week that Old Mutual has “actually been increasing [its] portfolio weights in SA”.
“Our offshore allocation is under the 30% regulatory threshold,” he said.
Old Mutual chief economist Johann Els said the diversified financial services company believes the ANC is on track for “a comfortable win” and, as such, they expect more decisive moves to materialise after the elections, all of which will contribute towards the strengthening of confidence levels across the country.
“And we already know that confidence is a key driver of growth,” he said.
“A good ANC election outcome and policy reform would lead to a stronger rand, based on improved confidence, and it could quite likely reach R12 to the dollar in 2019, with increased rand stability over the next few years if growth picks up in the direction of 3% to 3.5%.”
Brooke agreed, saying the “two most important themes that we are considering for the year ahead are a US economic downturn and a recovery in the SA economy”.
It was not all roses though, and for the positive outlook to have substance, the “reformists in the ANC” must make very important and definite policy decisions.
“The risk for markets and the economy is if the ANC remains divided and does not make the required reforms, given that there simply isn’t room for error in the economy right now,” he warned. “If SA does not resolve the Eskom crisis we will be downgraded to junk status.”
The SA economy has just clawed itself out of recession, the rand has been struggling and the stock market has gone nowhere, except — it would appear — south. According to Brooke, the cheaper equity valuation of the SA market is supported by good news on the valuation front across most SA asset classes...