{"id":66791,"date":"2024-05-25T14:49:34","date_gmt":"2024-05-25T14:49:34","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-election-unsettling-but-full-of-opportunities-allan-gray"},"modified":"2024-05-25T14:49:34","modified_gmt":"2024-05-25T14:49:34","slug":"south-african-election-unsettling-but-full-of-opportunities-allan-gray","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-election-unsettling-but-full-of-opportunities-allan-gray","title":{"rendered":"South African election \u2018unsettling\u2019 but full of opportunities \u2013 Allan Gray"},"content":{"rendered":"

Africa-Press – South-Africa. <\/strong><\/span>While the national elections at the end of the month have introduced significant uncertainty to financial markets, investors should remember that they are not the main driver behind stock market returns and actually present unique opportunities.<\/p>\n

This is feedback from Marise Bester, an investment specialist at Allan Gray, who urged investors not to try to predict the outcome of the election or time the market.<\/p>\n

\u201cIn our view, the year 2024 has above-average political risk,\u201d she said. \u201cThe uncertainty about the upcoming election is unsettling, but also positive, as it\u2019s a true reflection of a healthy democracy.\u201d<\/p>\n

Bester explained that elections tend to strongly affect the performance of the JSE but only for a short time before other factors, such as company earnings, cash flow, and the business environment, take over again.<\/p>\n

Looking at the performance of the JSE All Share Index (ALSI) over the past 30 years, there have only been five years in which the index reported a negative return \u2013 1997, 1998, 2002, 2008 and 2018.<\/p>\n

\u201cNone of these years coincided with a general election,\u201d Bester noted. \u201cMarkets are cyclical, and short-term volatility also leads to fluctuating returns with no clear pattern, even during repeat events such as election years.\u201d<\/p>\n

However, she said that this is not a typical election cycle as the outcome of this election could drastically change the country\u2019s economic policy.<\/p>\n

\u201cThe outcome of the May election could drastically change many policies that could affect companies in different ways. But the same was true in 1994, and the ALSI achieved a return of 23% that year.\u201d<\/p>\n

Despite the market shocks and rebounds, local equities have grown by 13% per annum over the past three decades, underscoring the importance of focusing on the longer-term.<\/p>\n

While short-term fluctuations are likely to occur around the election, history suggests that the long-term trajectory of the market is driven by broader economic factors and company fundamentals.<\/p>\n

\u201cHistory has also taught us that investors who have endured the tough periods and adopted a longer-term view at the most uncomfortable of times tend to be rewarded for their patience.\u201d<\/p>\n

Investors should focus on what is within their control rather than what is not. \u201cWhat we can control is how we react both in the run-up to and after the election, keeping our emotions in check,\u201d she said.<\/p>\n

\u201cThis has been illustrated over time by investors switching out of equities into cash during times of uncertainty, often locking in losses.\u201d<\/p>\n

South African assets primed for rally<\/p>\n

In a Bloomberg survey of 26 emerging-market investors, most were overweight or neutral on South Africa and said they preferred the country over investing in Egypt or Nigeria.<\/p>\n

\u201cThe election uncertainty has been weighing on South Africa, so an outcome that rules out a populist government would be received well by the market,\u201d said Kaan Nazli, a portfolio manager at Neuberger Berman Asset Management.<\/p>\n

A favourable outcome would also allow the government to focus on structural reforms to unlock economic growth, he said.<\/p>\n

Almost two-thirds of respondents said they\u2019d be most likely to increase exposure to South Africa if the election results in a coalition between the ANC and the official opposition Democratic Alliance, while 19% said they would do so if the ANC won outright, but with a reduced majority.<\/p>\n

More than 90% of respondents said they expect assets to rally in the event of an election outcome that ensures policy continuity.<\/p>\n

\u201cIf the election turns out reasonably, you could see quite a bit of foreign buying coming into our markets,\u201d said Peter Armitage, CEO of Anchor Capital.<\/p>\n

The Johannesburg-based money manager said he became more bullish on South African stocks about two months ago, and has bought \u201cquite heavily\u201d into banks, as well as retailers including Shoprite and some real estate firms.<\/p>\n

To be sure, investors were quick to point out that any rally would be short-lived unless the new government made some dramatic reforms.<\/p>\n

For More News And Analysis About South-Africa<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – South-Africa. While the national elections at the end of the month have introduced significant uncertainty to financial markets, investors should remember that they are not the main driver behind stock market returns and actually present unique opportunities. 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