BofA Investor Conference: Investors still keen on SA assets?

Bank of America Securities recently hosted a media briefing with senior global research colleagues to discuss the prevailing views of international and domestic investors attending its annual investor conference at Sun City. Here to provide insights on some of the highlights of South Africa-related investment strategies is Tatonga Rusike, Sub-Saharan Africa Economist for Bank of America Global Research. Rusike delved into the shifting investor sentiment, citing two key factors - the global story and the South Africa story. Foreign assets have been net sellers of South African bonds and equities. However, globally, central banks are pivoting towards cutting cycles, which bodes well for South Africa and the rand. The potential strengthening of the rand could attract non-residents to local currency markets in bonds and stocks. On the domestic front, factors such as a well-performing budget, anticipated central bank cutting cycles post-elections, and fiscal management are pivotal. The weakening of the dollar could lead to a strengthening of the rand, benefiting South Africa's export conditions and potentially uplifting commodity prices. This could further aid in achieving the central bank's inflation target and initiating a cutting cycle in the latter part of the year. With South Africa constituting around 3 percent of the MSCI's world index, investors are assessing the country's investment attractiveness. South African firms changing listings and inclusions from other jurisdictions have contributed to this percentage decline. The equities market, particularly rate-sensitive sectors like retailers and consumption, could benefit from the anticipated cutting cycles. In terms of the growth forecast, a projected GDP growth of 1.3 percent for the year is anchored on consumption and investment, with a focus on addressing issues in the electricity and logistic sectors. Structural growth reforms remain crucial, with recent government documents allowing third-party use of the rail network and private involvement in unlocking sector rigidities showcasing positive strides. While acknowledging the time-consuming nature of these reforms, the direction and signaling are deemed promising. Investments in infrastructure and advancements in regulatory frameworks and policies, such as private generation in the electricity sector, are pivotal in propelling South Africa's growth trajectory. Although challenges persist, the potential impact of these strategies can foster a more favorable investment landscape for the nation.