Why South African equities offer remarkable long-term value right now - December 2020

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Coronation Insights

Coronation Insights

If you are an investor who has taken refuge in the perceived safety of cash and near-cash investments, it may be an opportune time to come out of hiding. South African equities are currently offering compelling value, and there are opportunities for investors who are willing to take a long-term view.

It’s not surprising that you may have de-risked your investment portfolio given the economic crisis we have experienced. However, the low interest rate environment means that cash has recently been delivering returns that are trailing inflation and is likely to continue doing so for some time to come. Local equities, on the other hand, are undemandingly priced and offer a better chance of beating inflation, to grow your wealth over time.

Why is the South African stock market looking so attractive?

Over the past three years, foreign investors have been consistent sellers of South African equities. Local investors also lost their appetite for domestic equities during a period of considerable economic and political challenges. As a result of this large scale selling, equity returns have disappointed over the last five years, uncharacteristically underperforming bonds and cash. Because so many investors gave up on the local market, many shares are now cheap, resulting in compelling value available in the local stock market.

Investing in 20 of the top ideas on the JSE

To gain access to the market, an SA equity-only solution is Coronation’s Top 20 Fund. This concentrated portfolio gives you access to Coronation’s best investment ideas on the JSE. Limiting exposure to 20 shares does mean that it’s a higher risk fund and there may be short-term periods of disappointing performance. But if you are comfortable with riding these out, you can benefit from the longer-term investment potential currently available.

Double the index since launching

Top 20 turned 20 this year and has doubled the returns of its benchmark index over those two decades. R100 000 invested at launch in 2000 would have grown to more than R2 million as at the end of September 2020 – and that is after all fees.

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While we think that selected local shares are attractive at the moment and some equity exposure is appropriate for most investors, remember that it is sensible in almost all cases to appropriately diversify your portfolio between asset classes and geographies.

You can do this by investing online in a multi-asset fund with a minimum recommended investment period consistent with your time horizon, or by speaking to a qualified investment adviser about the right investment strategy for you.

To find out more about investing with Coronation, visit www.coronation.com

The information contained in this article is not based on the individual financial needs of any specific investor. Reference to specific funds should be read in conjunction with the Minimum Disclosure Documents available here. To find out more, speak to your financial adviser.