“—ity marets not perˆormin‰ ™ell
MBABANE – Umelusi Capital Head of Investments Smanga Mdluli says currently equity markets are not doing well because of high interest rate.
In an interview yesterday, Mdluli said when interest rates were high; companies were not able to borrow funds and if they were not borrowing funds, they were not expanding and getting into capital projects.
He said therefore share prices at that time, remained stagnant or even drop leading to less activity in the equity markets.
He said what was currently doing better, was the short term instruments which include money markets.
“People have pulled away from equities at the moment and they have gone into the short term investments like the money markets,” he said.
The investments expert highlighted that as predicated that interest
rates were expected to drop by the second half of the year, then it could be expected that tides would turn.
He said then investors would be seen getting back into equities and leave the short term market.
Platforms
“This period is called the risk off period because investors are moving away from the high risk investment/ assets platforms and move into what is safer which the money markets are,” Mdluli said.
He said when the interest rate
drop; investors would be seen back into the risk on assets and start investing into the riskier platforms like the equities.
Mdluli further highlighted that the local stock exchange was currently stagnant and they were not expecting much of a change unlike in other places like the Johannesburg Stock Exchange and the New York Stock Exchange.
He said organisations like Umelusi Capital were working around bringing some vibrancy in the local stock exchange with time.