Ninety One, which has about R3-trillion in assets under management , is boosting the offshore equity exposure in some of its flagship funds as SA’s stagnant economy reduces the appeal of local equities despite their attractive valuations.
Hannes van den Berg, co-head of SA equity at Ninety One, says the group entered 2023 with offshore equity exposure of just less than 30% in its equity-only and multi-asset funds, but has since increased that to about 37%. It is now looking to raise that even closer closer to 40% in the short to medium term, with 45% being the maximum amount local fund managers can allocate to offshore assets under SA’s pension fund regulations.
However, with load-shedding showing no signs of abating and everyone from the Reserve Bank to the IMF predicting near-zero growth for SA in 2023, there appears to be limited scope for further equity market gains over the next six to 12 months. On top of that, the cumulative 425 basis points in interest rate hikes by Reserve Bank have left SA consumers reeling as they battle with rising costs of living driven by food price inflation, higher energy costs and ongoing administrative price hikes.
“The reason we like emerging market equities is not because they are dirt cheap, which is the consensus, but because of the very strong economic fundamentals and positive sentiment they enjoy thanks to China reopening,” said Teichgreeber. “In the US pretty much every one of the four factors we measure is negative for equities. We’ve got weakening economic fundamentals, tighter financial conditions, softer sentiment and shares are expensive.
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