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It doesn\u2019t really matter what the rand does this year, say analysts: the big growth themes driving markets are all to be found abroad<\/p>\n
It\u2019s not an easy time for investors pinning their hopes on the South African stock market.<\/p>\n
A dwindling number of investable stocks on local bourses, a flat performance in 2023 and an economy all but stalled as the government stumbles from one policy blunder to another have sapped the life out of the local market. Not to mention how those locally listed companies that do have some ammunition left are opting to explore overseas opportunities rather than deal with the government\u2019s plethora of investment obstacles.<\/p>\n
The JSE all share index was up 5.3% in 2023, compared with the the S&P 500\u2019s 24.4% gain over the same period. The rand, weighed down by a strong dollar, stuttering economic growth in China and the whims of South African politicians, has weakened almost 9% over the past 12 months.<\/p>\n
What the currency does in the next 12 months is anyone\u2019s guess. \u201cThe rand will probably be in the range of R18.50-R19 [a dollar this year],\u201d says Peter Armitage, MD of Anchor Capital. \u201cBut it isn\u2019t unusual for the rand to move R2-R3 either way.\u201d<\/p>\n
Unless the US economy experiences a major shock to the downside, the dollar is set to cling to its value this year. In December, the US economy added 216,000 jobs, according to the country\u2019s labour department, considerably more than analyst expectations of 170,000, showing how much firing power is left in the world\u2019s biggest economy. The number also seriously dented the case for an imminent rate cut by the US Federal Reserve.<\/p>\n
\u201cThe dollar has been very strong against all currencies,\u201d notes Armitage.<\/p>\n
When rates come down \u2014 by however much \u2014 it will be a trigger for equities<\/strong><\/p>\n David Shapiro<\/em><\/p>\n But David Shapiro, chief global equity strategist at Sasfin Securities, says he won\u2019t be surprised if the Fed and other central banks start to cut rates this year. \u201cWhen rates come down \u2014 by however much \u2014 it will be a trigger for equities,\u201d he says.<\/p>\n On the flipside, China, the largest destination for South African exports, is struggling to regain the economic growth of not so long ago. According to Oxford Economics, the world\u2019s second-biggest economy will grow 4.4% this year.<\/p>\n \u201cThe persistence of domestic regulatory uncertainties will temper the investment recovery, excluding property, in 2024,\u201d the research outfit writes in a note.<\/p>\n \u201cChina is the second-most important [factor] for [the rand],\u201d says Armitage. \u201c[It depends] on whether they will get their growth back.\u201d Growth would imply appetite for the commodities that we mine and sell.<\/p>\n Then there\u2019s a third factor:\u00a0 the current political stewardship of the economy.<\/p>\n With haphazard electricity generation, failing local government infrastructure, BEE regulations that stifle foreign direct investment and the populist rhetoric of an election year, the rand is hardly likely to receive much local support.<\/p>\n So where does this leave investors? \u201cSouth Africa constitutes less than 1% of the global equity market,\u201d says Armitage, adding that from a diversification point of view, it makes sense to ship some investments abroad.<\/p>\n Shapiro points to certain investment themes that may remain popular this year. For one, the excitement stirred up by AI will continue to draw investors\u2019 attention.<\/p>\n \u201cThe AI story is still going strong,\u201d he says. \u201cThe benefits of AI will come from company spend.\u201d For instance, the move to cloud computing and demand for software utilising AI will continue to accelerate, he says. The key companies specialising in this sector are all offshore \u2014 and mostly US-based.<\/p>\n Then there\u2019s the weight-loss drug phenomena unleashed by pharmaceutical companies Eli Lilly and Novo Nordisk. \u201cDon\u2019t take this theme lightly,\u201d says Shapiro. \u201cThere is massive demand for these drugs.\u201d<\/p>\n If a local investor wishes to benefit from any of these themes, they\u2019d be hard-pressed to find South African stocks offering such access. It means going offshore is a necessity.<\/p>\n But, warns Armitage: \u201cIt is significantly harder to invest offshore now.\u201d<\/p>\n That\u2019s due to two issues. First, people older than 18 can invest R10m abroad, but this limit hasn\u2019t been adjusted for inflation for almost nine years; that R10m from 2015 is now worth R6.5m.<\/p>\n Second, says Armitage, it\u2019s no longer just the Reserve Bank that has to sign off on sending money abroad; the South African Revenue Service has now made investing offshore a tax compliance tool. Anyone who wants to apply for their R10m offshore allowance must prove that their domestic tax affairs are in order. Another hoop to jump through, then.<\/p>\n","protected":false},"excerpt":{"rendered":" It doesn\u2019t really matter what the rand does this year, say analysts: the big growth themes driving markets are all to be found abroad It\u2019s…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1609","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1609","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1609"}],"version-history":[{"count":1,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1609\/revisions"}],"predecessor-version":[{"id":1612,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1609\/revisions\/1612"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1609"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1609"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1609"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2024\/01\/unnamed.jpg\")
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