South Africa the negative in views on global economy Leading

THE recent annual BCI Global Investment Seminar at the Spier Estate drew 150 of the country’s top investment managers, all enjoying the privilege of listening to 36 of some of the finest fund managers and economists giving their views on the local and global economy.

Schroders, Morningstar, Orbis, Prescient, Franklin Templeton were just some of the global names in attendance, along with Investec, Allan Gray, Coronation, Sanlam, 36One, Sesfikile and Efficient’s Dawie Roodt, who provided the local flavour.

What is crucial to understand is that it is not just ideas discussed, it is facts based on data that generally tell a similar past and future story.

There are obviously some aspects that are open to interpretation. However, when it comes to numbers, 1+1=2, not 3.

In light of that, it was rewarding to take away many crucial ideas, good and bad:

Bullish

Globally everything seems to be either stable or bullish. The EU, especially EU property and banks, seem to be relatively strong.

The UK may not be as positive due to ‘Brexit’/political issues, but there is more upside potential over the next few years.

As for the US, all data points to it being in a very strong and stable economic position.

Growth and employment are high. However they do have massive debt and then there is the “Trump factor” causing ripples throughout the US, which in turn could lead to the emergence of a growth bubble.

In short, before you plough more money into the US, weigh-up your options.

Very bullish

Emerging markets, particularly China, India, Korea and even Russia, are looking positive.

Their growth, in turn, is leading to a renewed demand for resources.

One presenter from Prescient, Liang Du, gave two examples of Chinese stability.

One is that the property market cannot easily overheat due to buyers having to place 30%-50% deposits before purchasing property.

That reduces the potential for default and further stabilises the property and banking sector.

Secondly, the Chinese stock market has more than 2 700 listed companies; 1 500 are more liquid than our JSE top 40!

India

India’s 70% rural population will lead to a decades-long urbanisation process.

Urbanisation, in turn, leads to further infrastructural development, jobs, economic and property growth.

In short, India is the next China and could be the third largest economy within 25 years.

Bearish

Only one negative arose: South Africa. Not one single manager, local or foreign, was overly positive on the short term (2017), primarily due to Jacob Zuma, corruption and a total lack or implementation of economic policy.

That is very sad given EM strength, as well as the fact that the country will never reduce unemployment and poverty, or address land issues if we do not have a stable economy and economic growth.

Our only saving graces are the rand and EM strength, as well as lower inflation and the account deficit. For opportunist investors there are benefits, owing to the fact that domestic markets, based on future valuations, are at a low and therefore offer a very good mid-to-long-term buy.

For presentation downloads visit http://bcisconference.com/presentations-2017/