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Our StandPoint

Q2 | July 2023

Heavy weather ahead

Alan Ehret

Head of Retail Distribution

The skies are darkening over the global economy as we reach the halfway point of the year. Although there are signs that inflation is cooling, the stress in the banking sector has increased the risk of a US recession, the war in Ukraine still threatens broader geopolitical tensions and China’s post-reopening economic surge in Q1 is already losing momentum.

Locally, the Rand declined against the Dollar. The markets’ confidence in SA, already corroded by the self-evident indictment of loadshedding, has been further affected by the apparent change in SA’s neutral stance, to be more allied with Russia. Aside from the risk of international sanctions, it is worth considering that the African Growth and Opportunities Act, under which SA’s citrus farmers export 100,000 tonnes of fruit every year to the US, is due to expire in 2025 and will be discussed in US Congress over the next 18 months. Presumably acolytes of Vladimir Putin need not
apply. If the bears needed yet another reason to sell the rand, slowing Chinese growth inevitably casts a long shadow over global commodity prices and South Africa’s trade balance. Forecasts of SA’s GDP growth are being revised downwards and unemployment is creeping up once again. This all sounds like one-way traffic; precisely the environment in which experienced portfolio managers with a strong grasp of fundamentals and a long view can be contrarian and make great returns for their investors. With that in mind, in this edition of STANDPOINT we have gathered the thoughts of some of our leading managers and analysts to feed our clients’ thinking above and beyond the daily


Rademeyer Vermaak, Head of Systematic Solutions, blows away some of the misconceptions surrounding style investing; he explains that it is an active, smart and consistent way to build portfolios. His team combines multiple styles (value, quality and growth) simultaneously to generate superior returns: STANLIB’s multi-style approach has outperformed any single-style approach since 2016, with lower volatility.


Kevin Lings, STANLIB’s well-known Chief Economist, discusses why the price of food, which is the single largest component of SA’s Consumer Price Index, continues to rise in SA while it is decreasing in the rest of the world. He expects SA’s food prices to trend lower in late 2023-2024, if a few conditions are in place.


Kholofelo Molewa, Portfolio Manager of the STANLIB Khanyisa Impact Investment Fund, delves into the complexity of SA’s electricity supply crisis. Whatever solution is found must ‘thread the needle’ of simultaneous challenges: to keep the nation’s lights on while bringing on the Just Energy Transition, all the while protecting South Africa’s many communities who depend on the coal economy. It will demand leadership and joined-up thinking by government.


South African Government Bonds (SAGBs) present a compelling investment case, argues STANLIB’s highly-respected Head of Fixed Income, Victor Mphaphuli. They are currently offering a real yield of at least 5% (as at 31 May 2023), and while we are braced for heightened volatility in the next two quarters as central banks continue reacting to the data, Victor believes that SAGBs are now priced for a lot of bad news. On a 12-month view, Victor says, bonds will again prove their worth as a diversifier in equity-centric multi-asset portfolios.


We trust you will find this edition of STANDPOINT thought-provoking. To continue the nautical metaphor above, we look forward to helping you ride out any storms that may come and to be ready to hoist your sails when the mercury rises.


Kind regards,
Alan Ehret

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