S.A can avoid a downgrade this year - JHB Citadel head - CNBC Africa

S.A can avoid a downgrade this year - JHB Citadel head

Southern Africa

by Aviwe Mtila and Trust Matsilele 0

The director and regional head at JHB Citadel, says South Africa could avoid a downgrade this year. Photo: Wikimedia.

South Africa has faced a flurry of challenges, from the slowdown in China, to United States hiking interest rates, to South Africa experiencing the worst drought in decades and the possibility of being downgraded to junk.

Speaking to CNBC Africa, Ian Bishop, the director and regional head at JHB Citadel, says South Africa could avoid a downgrade this year and also gives tips on how to invest in these turbulent times.

Bishop warns that, in these harsh times, it is important for clients to get the relevant advice to their needs and economic needs. He also says when markets are very volatile, one should stick to their plans when it comes to asset allocation.

READ THE HIGHLIGHTS FROM THE CONVERSATION BELOW OR WATCH THE VIDEO:

“It’s been very volatile in January and February this year, I refer to it as the perfect storm. We’ve had the drought, political issues to deal with and markets. I think in South Africa we’re very dependent on China and Chinese growth has really upset and concerned global markets and, depending on how you’re positioned in a portfolio, has and had an implication, especially if you’ve had exposure to equities.”

-          Ian Bishop, Director and Regional Head at JHB Citadel.

“It’s very important for an adviser to understand the clients’ goals and requirements and then to design a plan that’s appropriate. It’s no good in an environment that we’re in at the moment, to be overexposed to equities if you have an income need and the dividends that you’ll generate from those equities won’t meet your lifestyle requirements. So it’s very important, especially in the current environment, to try and stick to your plan.”

-          Ian Bishop, Director and Regional Head at JHB Citadel.

[video]

“If you look at the S&P 500 (Standard & Poor's 500) in the course of February, just in the last two weeks it has gone from about 1 830 to almost 2 000. That’s over 9 per cent increase. You might have decided to time the markets earlier in the month and if you missed that run, you missed out on 9 per cent growth. So your markets have been very volatile and you’ve got to try and stick to your plan.”

-          Ian Bishop, Director and Regional Head at JHB Citadel.

“What’s important is time in the market, if you invest in equities, that is very important. So if you’re going to a portfolio that's a hundred per cent in equities, you need to be able to weather the storm and overtime, which is eight to ten years, the volatility of equities is very similar to bonds and you should achieve better, real, returns, that’s inflation beating returns. But the question for everybody is that ‘can you sit through that volatility through that period of time’. That is the difficulty that a lot of people face when they chop and change.”

-          Ian Bishop, Director and Regional Head at JHB Citadel.

“In South Africa we believe that we’re in a low growth environment and we see growth below half per cent for the next coming year and a few years thereafter, whereas we’re more bullish on international growth. We think that will change overtime but in the current scenario we prefer to be overweight offshore than locally.”

-          Ian Bishop, Director & Regional Head at JHB Citadel.

“It’s more of a growth issue which is also related to the downgrade. If we don’t grow at a reasonable rate, that’s going to increase our chances of a downgrade. Funny enough we’re very confident on our local debt which a lot of people aren’t necessarily looking at it from a downgrade point of view. Whereas we understand that our international debt is closer to junk status than the local debt. So we believe actually that during the course of this year, if things go according to plan and [Finance] Minister [Pravin] Gordhan is able to implement what he said in the budget, we won’t necessarily get a downgrade this year.”

-          Ian Bishop, Director & Regional Head at JHB Citadel.

Comments