Beating The Odds

Uncertainty still reigns locally and globally. Therefore, investors have to be innovative when looking for investment opportunities.

- Leon Kok

domestic equities may be considered to offer great value and the potential for the strongest rerating, but most portfolio managers appear to be opting for restraint – a theme that became evident in discussions with analysts this quarter.

Locally, it remains unclear whether President Cyril Ramphosa’s new government will usher in bolder stage-two reforms.

There’s concern about the dangers of further structural weakening of the economy, fear of additional fiscal deterioration resulting from higher expenditure pressures, and apprehension of the supportive role of global markets. The trade war between the US and China is not helping with considerable outflows from emerging market (EM) bonds and equities.

Allan Gray senior executive, Vuyo Nogantshi, reminded me again that “diversification is the only free lunch in finance”. He warned about overconcentration in SA’s relatively small equities market, with the top ten shares on the JSE making up 50% to 60% of the index. In contrast, the top ten shares in one of the world’s major indices, the S&P 500, makes up just over 20% of the index.