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As South African stock investors eye 2020, budget looms large

Investors are looking for answers and solutions for the issues at large.

South Africa’s budget, due to be presented next month, is looming as a key first-quarter event for investors seeking insights on the outlook for a stock market that failed to keep pace with emerging-market peers last year.

Johannesburg’s benchmark index was held back in 2019 by the dismal performance of the local economy, which is at risk of slipping into recession. The FTSE/JSE Africa All Share Index climbed 8.2%, well short of the 15% gain in the MSCI Emerging Markets Index.


Finance Minister Tito Mboweni’s February budget speech will be scrutinised for evidence that South Africa is doing enough to preserve its last remaining investment-grade rating from Moody’s Investors Service. In November, the ratings company changed its outlook on the nation’s assessment to negative and said it wants to see a “credible fiscal strategy to contain the rise in debt” in the budget. Traders will also examine any plans to manage crippling debts at the state-owned power utility, which is struggling to maintain steady electricity supplies, and the loss-making national airline.

“The budget is the next big thing,” said Peter Takaendesa, a money manager at Mergence Investment Managers in Cape Town. Sentiment could be boosted by “any credible effort to show that the government is willing to avoid a downgrade and is ready to present a concrete path to reducing government debt with achievable targets,” he said.

Early optimism among investors of improved management of the economy under Cyril Ramaphosa, president since February 2018, has been partly replaced by impatience over slow progress in areas ranging from tackling ballooning public sector wages to the sale of new broadband spectrum. South Africa’s economy has contracted in two of the last three quarters, and the International Monetary Fund forecasts sluggish growth in 2020, trailing population growth for the sixth year in a row.

“Investors have become increasingly frustrated with the pace of reforms that were expected under President Ramaphosa,” said Michele Santangelo, a money manager at Independent Securities. “The historically weak GDP figures and weak expected growth going forward for at least the next two years have also weighed heavily with economic sentiment and expectations for South Africa-centric businesses.”

Negative sentiment toward South Africa-focused stocks, worsened by weak consumer and business confidence, helped spur record sales by foreigners of Johannesburg-traded equities. By December 30, net sales had reached more than $8.7 billion, the most since Bloomberg began compiling the data in 1998.

“SA Inc. stocks are in for another tough few years,” said Casparus Treurnicht, a money manager at Gryphon Asset Management. “Our economic environment will remain depressed. We are in for a long period of recovery if that happens at all.”

© 2020 Bloomberg L.P.

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Wasn’t it Old Mutual who was saying early last year that the JSE will be one of the best global markets going forward, based on valuations? And here we are trailing not only the US and European markets by miles, but also our EM peers.When will the asset managers start speaking the truth to their clients? Here’s a hint: never.

and the SA doomsday gang called the ZAR to 20…they have been doing from 2003….still waiting

I am so glad that the Gold, Platinum, Palladium and Iron ore prices are looking very good of late.

The Rand has to improve, it is like trying to stop a Tsunami.

What will the Doomsday preps say when the ZAR goes below the ZAR 14 to the USD?

Eskom is in a state of collapse and ergo, so is the country.

To have any chance of success, its debt needs to be wiped out and tarrifs dropped to affordable levels.

Municipalities need to stop their annual double digit increases for services and need to be repurposed to serve communities and not employees.

The chances of any of this happening is slim to none. Instead, climate change, loadshedding and widespread corruption are far more likely going to be the order of the day.

Cyril’s term ends before the decade is out and what’s likely to replace him is very discouraging.

The 2020’s will be the decade of the great unraveling – not only here but abroad too.

…..your 2nd to last paragraph is a paramount concern. Unfortunately for Sub Saharan Africa and South Africa is no exception, the trend is each consecutive leader is paler or more detrimental than the previous

Cyril has not proven himself different to Zuma but is just as mediocre, corrupt and pales in comparison to President Mbeki

Who arrives after Cyril is already planning his days of affluence

Julius’s decade unfortunately.

It seems that government employees get paid a lot more than the private sector employees and their productivity is far lower or non existent in some cases.

For as long as this persists forget about any chances of an economic recovery.

Also for as long people’s property rights are not respected, the educated will continue to emigrate.

Also people were constantly encouraged to run and invest their money overseas, when will this stop?
Some South Africans are trying to support their country and house while others constantly take money overseas? and then they complain about the economy?

Speculator

If we had collectively, all, including in our pensions invested say 33% offshore since WWII, our nation would be FAR better off today in terms of savings sufficiency, foreign investment income, risk diversity, everything.

If John invests offshore (1) it is still an SA asset (2) the income is taxed here. I do not see how that affects you and your house unless you believe everybody else should be buying SA shares to boost the price you can sell to them at?????

if ‘civil servants’ had target driven/measuruble deliverables a lot of them would’ve been kicked to the kerb – but they don’t and they have unions that are in bed with their so…..

A raise in PAYE is definitely coming, VAT has already been done so that is next even though it was not that long ago raised.

Oh wait Patrick @ least ‘the free social grant market can continue to buy alcohol…’

For budget I would not be surprised to see:

hikes in the capital gains inclusion rate.

increased withholding taxes to try and stem tax leakage via tax havens with especially payments for intangibles in multinationals but also on interest and dividends.

virtually no bracket creep relief in the higher parts of the tax brackets.

12J severely curtailed.

more bad news

no good news

Agree. Told the missus… If I pay more taxes, then I contribute to unemployment >>>goodbye domestec worker. That’s a decent saving. And so the vicious cycle continues in this crazy SA Inc.

what was that stupid word they came up soon after Cyril ‘took over’ – oh yes, Ramaphoria which may as well mean: that feeling you get that you’re about to win the lottery only to discover that the lottery doesn’t exist or was looted before you could cash in your winning ticket. the ANC and it’s various mouthpieces really have become disconnected from the reality that is debt laden, loaded shedded, striking South Africa. the budget speech next month will be another fancy dress party, a speech followed by a spike in prozac consumption. the Another National Crisis party really has run out of steam. soon the whole of SA will be in business rescue. it is sad to see so much opportunity being – I’d like to say squandered but the word stolen fits better.

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