Bank of America (BofA) analysts said yesterday South African equities alongside Turkey recorded stronger inflows in June, bucking emerging market trends that are largely dominated by outflows.
In the last trade session of June, a net of R3 billion worth of equities was purchased by non-residents, with market analysts saying they would be watching these inflows over the next few weeks as investor confidence rebounds following the Government of National Unity (GNU) and appointment of the Cabinet.
“(It) will be interesting to see what the figure will be today after the formation of the GNU. We need to see this trend stay in place as foreign liquidity is key to our market pushing up further,” said Marco Olevano, a South African market analyst.
According to Vladimir Osakovskiy, emerging markets sovereign and equities strategist at BofA Merrill Lynch, net equity outflows from emerging markets “moderated in late June as divergent flows in/out of select markets” strengthened.
This regional trend was in contrast to the flow of South African and Türkiye equities.
“South Africa and Türkiye equities see strengthening inflows in late June vs continued robust outflows from the rest of Europe, the Middle East and Africa,” said the BofA analysts.
Among the emerging markets, the Gulf Cooperation Council (GCC) bloc, and the Central and Eastern Europe region equities “continue to see robust outflows” although these had been “partly offset by rising inflows to Türkiye and, particularly South Africa,” added the analysts.
In South Africa, BofA cited Sasol among the emerging markets’s top 15 list of fear of missing out on investing in stocks that have a buzz around them.
This list is topped by Saudi Arabia’s Riyad Bank. Sasol has traded 17.52% stronger in the past 30 days, with its stock valued at about R142.58 by yesterday’s afternoon trade session on the JSE.
Additionally, Kumba Iron Ore and Old Mutual were rated among the top 10 emerging markets stocks classified as “picky”, referring to their status as giving satisfaction to investors on their strategic advantage.
Investors picking these stocks ordinarily do so instead of trending stocks, at a particular time.
Old Mutual has rebounded by about 19.4% on the JSE in the past 30 days and was trading at around R12.44 in the afternoon trade session yesterday.
The BofA analysts said the inflows into SA equities “seems to be benefiting from fading domestic political risks” after the elections that ushered in the GNU and the appointment of Cabinet ministers, including those from less radical opposition parties.
They said SA equities remain “well positioned to gain from the ongoing global economic recovery” trends.
Analysts at Stanlib also said yesterday: “Key equity markets, including in SA have taken heart from positive economic and political developments in the past week.”
This after the JSE All-Share Index gained 5.1% since the beginning of the year on news of the formation of the GNU.
Over the past year, the rand has also gained an impressive 4.6% year on year against the dollar. In contrast, the index of emerging market currencies is down -3.8% year on year.
BUSINESS REPORT