Lubabalo Khenyane

Domestic assets have performed well since the formation of a government of national unity (GNU) in South Africa. This was largely in anticipation of some of the positives we highlighted in the previous quarter. As we draw closer towards the end of the year, we think investors will increasingly be looking for evidence of delivery to match the sentiment.

To this end, the 170 days (as of 16 Sep) of no loadshedding by Eskom and the progress being made by Operation Vulindlela are just some examples of the evidence investors are looking for. In addition, the South African Reserve Bank (SARB) is expected to commence its interest rate-cutting cycle this month as recent inflation prints are now closer to the mid-point of its 3% to 6% band.

Lower interest rates, alongside withdrawals from the newly introduced two-pot system, should increase the domestic consumer’s buying power and keep the enthusiasm towards domestic assets high.

Globally, the US Federal Reserve is also expected to start cutting interest rates, and this, together with expectations of tax cuts post the November election, will keep the momentum going.

On the back of these, we remain positive on local assets compared with global assets. Specifically, SA-sensitive assets like property, bonds, and the rand are particularly attractive. Globally, we prefer equities and bonds. We remain negative on SA and global cash given our expectations of interest rate cuts over the next few months.