We have summarised key insights from the discussions below.
STANLIB Asset Management bullish about SA equities and bonds after structural reforms
Five key reforms by the South African government could start to deliver results for the broader economy in the next couple of years, resulting in an acceleration in GDP growth beyond National Treasury’s cautious forecasts.
The improving outlook for the South African economy, if reform momentum continues, is evident in the decision to overweight selected domestic bonds and equity by our Fixed Income and Multi-Asset teams.
Longer-dated bonds remain attractive
Our Fixed Income team has maintained an overweight position in South African bonds since early 2025, for several reasons. It originally took the position on expectations of astable domestic political environment, structural reform and GDP growth, as well as a slowing, but not recessionary, US economy. After mid-year up heavals, it sold down its position but bought in again.
The bond portfolios are still overweight SA bonds, but at the longer (10 years+) rather than the shorter end of the market. Kobo says short-dated bonds are looking expensive, but long-dated bonds still have room for appreciation. This view reflects the country's shift to a 3% inflation target, which it is on track to achieve, giving the SARB room for three or four interest rate cuts. The Fixed Income team is also comfortable with the improving fiscal environment. Structural economic reform is not yet priced into the market, nor is the possibility of a credit rating upgrade.
If the rand weakens again, it presents a risk to the local bond market, but the team is hedging the risk by buying dollars. However, its base case view is that the rand could strengthen over the next year.
SA financials preferred to SA retail
Our Multi Asset team has been constructive on SA for the past few years. It started to position their funds to take advantage of the opportunity in SA bonds and South African midcap and domestic equity ahead of the 2024 election. The team is now more neutral on SA bonds. The valuation argument in real yield remains compelling but spreads versus corporate credit and emerging market peers are tightly priced now and as such now neutral on South African bonds, looking for better tactical opportunities.
The Multi Asset team’s asset class views coming into 2026 are SA listed property and SA equity (skewing away from gold), developed market equity and emerging market equity.
STANLIB’s multi-asset portfolios have enjoyed returns from the rapid gains in the gold price over the past year, but the team believes gold has become too speculative at the current juncture. Gold does form part of their longer-term strategic asset allocation, but the team is conscious that there is gold exposure in the passive holdings of South African equity. As a very risk-aware team, they feel they won’t enjoy the traditional correlation benefits that gold historically could provide atthe current juncture
Within South African equities, the team is skewed towards financial shares. South African banking shares have rallied, but earnings multiples remain attractive, profitability remains strong and relative to global comps there is a valuation argument to be made. Importantly, they believe SA banks are a better opportunity relative to SA bonds.
The team also prefers South African listed property. Yields are decent, structural issues are now behind the sector, and while they have enjoyed performance from the sector, they continue to hold the position as it delivers equity-type returns with less volatility than equities. It also helpswith portfolio construction especially when considering their skew away from precious metals
Unlike some of our peers, we are not enthusiastic about South African retail shares. There is a perception of value because retail companies’ valuations are low relative to their own history, but the South African economy is only growing at around 1.8%. With increased competition from the likes of Amazon and Shein, it is difficult to see how South African retailers will grow. Our process isn’t highlighting this as a great opportunity for us to make a meaningful allocation. The team would put SA retailers into a bucket of Too Hard.
In global equity, the Multi Asset team remains bullish on the changes that AI promises. US shares will benefit and, and the gains that the roll-out of AI will have for the broader US stock market.
The US is the most innovative market in the world, and despite concerns about the over valuation of tech shares, the speed of AI development means that portfolios cannot be underweight the US in the short term.
Key reforms
The five key reforms that have taken place in the last few years are in government finances, inflation targeting, electricity, rail and ports.
The South African government is now running a primary budget surplus, which is important to credit rating agencies, and is likely to be underlined in the upcoming National Budget. The Minister of Finance has approved, and the South African Reserve Bank will implement, an inflation target of 3%, down from the previous 3-6% range. In electricity, about 17 000 MW of private sector electricity projects have been registered with NERSA, while in rail, Transnet is targeting higher volumes and concessioning some rail lines, as well as infrastructure maintenance, to private operators. In ports, Transnet has signed a contract with an international company to manage the vital Pier 2 at Durban Container Port.
Our Economics team believes that on a 3-5year basis, SA’s GDP growth rate could exceed 3% because it is coming off a low base. Positive news boosts public confidence and helps to trigger a self-reinforcing cycle of investment.
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