As investors remain wary of the sustainability of the recovery, South Africa’s money managers are trying to navigate the fine line between controlling ongoing risks and taking advantage of the significant opportunities that the volatility has presented to them.
The risk profile of local bonds is fundamentally higher than it has ever been, according to Dalmeyer, but local equities aren’t, despite the volatility. With local bonds, “for the first time, we are questioning the creditworthiness of our sovereign”. City Lodge, Tsogo and Sun International have all lost stock value in the region of 60% this year. Nedbank is down 50%, Investec 45% and even the market darling, Capitec, has fallen by 40%.says what makes the local market’s moves even more misleading is that the rand has gone from R14 to the dollar at the beginning of the year to around R17.50/$1 so rand-hedge stocks like Prosus look even more valuable.