Stock party set to keep toasting valuations, weak rand and money policy

JPMorgan favours the chemicals sector, where fuel-from-coal producer Sasol is seen benefiting from higher oil prices, despite coal production issues, as well as platinum-group miners, with the metals expected to gain on rising demand from carmakers. It is also overweight telecom, with MTN Group expected to benefit from a growing fintech business in Africa as well as increasing demand for data, said strategist David Aserkoff.

Even after this year’s gains, valuations on the FTSE/JSE Africa all share index remain well below those of emerging-market peers. That presents buying opportunities for Allan Gray, SA’s largest privately owned money manager.

“The number one factor we think is always valuation,” said Tim Acker, a Cape Town-based portfolio manager at Allan Gray. “We are actually finding quite a lot of attractive opportunities, which makes us optimistic about the prospect for future returns.”

Acker favours companies with foreign earnings such as luxury retailer Richemont, and holding companies such as Remgro, which invests in listed SA firms and trades at a discount to its asset value.

Hannes van den Berg, co-head of SA equity and multiasset investments at Ninety One, sees the resources sector as the big beneficiary of global economic growth, while domestic industrials and retailers may get a boost from SA’s recovery. Continued gains, however, could come with more volatility, he said.

“Next year, also expect more volatility because of the interest rate hiking cycle globally,” Van den Berg said. “So don’t expect the same kind of records and returns as we’ve seen over the last 18 months.”

Bloomberg News. More stories like this are available on bloomberg.com