South Africa’s equity market capitalisation equates to more than 200% of the country’s gross domestic product (GDP), the highest proportion in the world and a level that is simply not sustainable. This is the view of Stanlib’s Chief Economist, Kevin Lings, who was one of the guest speakers at the Allan Gray Investment Summit 2019 in Cape Town last week.
“South African investors are in love with equities – we kind of think it’s the only place to be. This fixation cannot last. South Africans investors need to embrace different asset classes”, Lings shared with Summit attendees. According to Lings, while South African equities have underperformed in recent years, especially when compared to US stocks, their performance is actually in line with that of other emerging markets. Much of this has to do with the fact that economic growth in developing countries has struggled to recover since the 2008 financial crisis.
In his presentation he also touched on the economic growth in South Africa that has declined, that South African investors should include new asset classes in their portfolio construction, be realistic and not expect an instant turnaround in South Africa’s fortunes.
Given the scale of the turnaround required, Lings further said that South African investors will need to work harder to find good opportunities within the broader malaise.
Click here to download the media release and to read more about Lings’ insights.