UBS says South Africa’s Brazil moment is here

Bolliger says look to Brazil to anticipate South Africa moves.
UBS' Michael Bolliger favours the rand as well as South African stocks and bonds. Picture: Bloomberg

A corruption scandal that led to a political transition and economic reforms was the recipe for a rally in Brazilian assets, and South Africa is at a similar turning point.

Michael Bolliger, the head of emerging-market asset allocation at UBS Wealth Management, says South Africa’s new leader and the corruption charges lodged against former president Jacob Zuma on Friday are setting the stage for a repeat of what happened in Brazil. The stock market there has more than doubled and the real has surged 18% since early January 2016, when investors began betting on a change in government.

Traders should “act swiftly” and stay invested in South African assets to fully benefit from the expected steep jump in prices, according to the $2.4 trillion investment firm. In Brazil, that rally preceded an acceleration in economic growth and improved fundamentals as President Michel Temer took steps to contain public spending.

Of course, it hasn’t been entirely smooth cruising for Temer, whose approval rating is the lowest among the leaders of Latin America’s major economies. His failure to push a pension overhaul through Congress drew sovereign downgrades deeper into junk territory.

South African President Cyril Ramaphosa could face similar political challenges as he looks to bolster an economy burdened by a budget deficit and mounting debt load. He may have a slightly easier time as the urgency for more austerity has been eased by changes to the next budget and a looser monetary policy.

South African equities and bonds are the country’s most attractive assets, according to Bolliger. He expects the rand to appreciate almost 9% to 11 per dollar.

South Africa’s FTSE/JSE Africa Top 40 Index rallied 0.4% on Monday, the most in more than a week.

Bolliger says risk-tolerant investors should also be watching Venezuela, where a near-term transition of power could turn around the economy and benefit bonds issued by the government and state-owned entities. While the election in May is unlikely to unseat President Nicolas Maduro, the nation’s deepening recession will probably spur regime change in the next six to 12 months, according to Siobhan Morden, Nomura’s head of Latin America fixed-income strategy.

© 2018 Bloomberg 


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The new president has inherited so may hard issues to resolve, that the Brazil moment will probably have to wait a couple more years. Issues such as serious unemployment, sky high national debt, the effect of the nationwide drought (water shortage), budget constraints, fair redistribution of land are not to be resolved soon.

Methinks, with Zuma gone, the NPA should now do the right thing , and call KPMG to come clean on Kebblegate and Investecgate a.s.a.p.

To my knowledge Brazil did not have a pending landgrab or a flip flop party like the Eff who have obviously been made big promises by Cyril for :
A giving the Anc votes reqd to rewrite expropriation law , not to mention other
anti- white policies
B siding with Cyril to remove Trollip and Da
in Eastern Cape
C my prediction of removal of provincial governments , which would nullify Da
in Western Cape and cause semi-grants
to start ppppppPacking for Perth

But did Brazil have a let’s take the land for free moment?

Don’t underestimate the billigerence of ANC corruption though.

Well, at least on a ‘Soccer-o-meter’ scale, I recon BAFANA BAFANA has a long long long loooooooong way to go before they’ll be on par with Brazil’s National Team.

So, NO “Brazil moment” anytime soon for local supporters 🙁

A little skimpy and even I should do more research before commenting but I sense Cyril is doing nothing to “President Michel Temer took steps to contain public spending”. All the financial drains on SA are pretty much still in place – I bet even the Gupta / Eskom contracts; SAA, Water Affairs etc etc. I also guess that Brazil doesn’t have the drain of “money for nothing” BEE schemes that suck cash and profit out of companies into the pockets of connected cadres and, I would guess, from them, overseas. Now wait until it dawns on analysts that there won’t be any real property rights, starting maybe with land, in SA.

Not for me thanks. I’m already way too deep into SA property. No more.

“…way too deep into SA property”.

Even if one doesn’t own a rental property, but merely a primary residence, then like most of us, our assets are “over exposed” to one country.

To have ALL one’s discretionary investments either direct offshore or in rand-hedges, are still too low a weighting (considering the bulk of most of one’s funds are in Pension/RA vehicles, and local property…whether primary or rental)

Brazil is very different. For South Africa to succeed one must get rid of the entitlement culture, lack of productivity, the strikes at the drop of a hat, the bloated civil service and the corruption.

There’s vastly different cultural dynamics at play….literally a “continental shift” of differences.

In order for SA to experience a “Brazil moment”, our country need Brazil’s civilization right here in SA, in order to achieve the same. Right?

One hear of many catch-phrases “China or the East has achieved this or that, and we can achieve the same IF we perform xyz…” OK, then I respond: “OK, then bring the Chinese into SA, i.e. the same people who achieved xyz who made it happen, and SA will achieve similar”

Unrealistic to force Africa to into the same achievements from other civilizations. Respectfully, different things are important to us.

Yes, rather say “SA will have its Africa moment”. The result will be measured on a different scale/standard, and the outcome will differ.

Oh hell, let’s hope we never have an Africa moment.

But we are heading that way, cant you see????

“Africa moment” = general happiness (even when all of us are dirt poor, but we don’t realize that) 🙂

Be Africa happy…

End of comments.




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