Turning Tide for South African Investment

Strategic Insights -

Experts at the Think Investing Convention 2024 believe that South African markets are at a turning point, poised to thrive rather than just struggle, with higher returns on local equities versus US equities. The country's elections and the formation of the Government of National Unity (GNU) have had a significant impact on investment, with trillions of rand in foreign direct investment leaving the country before the elections but local equities being bullish since the formation of the GNU. The experts cited various reasons for this shift in sentiment, including global volatility and a more positive outlook for South Africa.

Key Takeaways:

  • The Think Investing Convention 2024 highlighted the turning point for South African markets, which are expected to thrive rather than just struggle, with higher returns on local equities versus US equities.
  • Tobie van Heerden, CEO of 10X Investments, compared the local asset management industry to the Springboks' performance in the Rugby World Cup, highlighting the analogy of how the team was winning by one point in games and just surviving, but it came out the other side and was now thriving.
  • South Africa's elections and the formation of the GNU were significant factors in the shift in investment sentiment, with trillions of rand in foreign direct investment leaving the country before the elections but local equities being bullish since the formation of the GNU.
  • Valdene Reddy, director of Capital Markets at the JSE, emphasized that the sentiment is shifting to become more positive, with actual data points on the fundamentals that are shifting as well.
  • The audience was bullish on emerging markets, followed by local equities, but pivoted away from US markets and bonds.
  • Research using the CAPE ratio showed that the growth outlook for local equity returns was higher than for US equities, with a 10-year real return estimate of about 4% for SA equities.

Statistics:

  • Trillions of rand in foreign direct investment left South African shores before the elections and new Government of National Unity (GNU).
  • Local equities have been bullish since the formation of the GNU.
  • 2024 has been a tumultuous year, with the war in Israel, hurricanes and elections in the US, and China's up-and-down performance.
  • The CAPE ratio for US equities had reached a near-record high of 37.
  • 10-year real return estimates for the S&P 500 pointed to real returns of only up to 2% real growth.
  • Local equities are expected to deliver real returns of about 4% if SA economic growth picks up.

Sources:

  • The article did not provide specific sources, but the quotes and information were cited from experts at the Think Investing Convention 2024, including Tobie van Heerden, Valdene Reddy, Anton Eser, and Christopher Eddy.