Turkey just isn’t one of these birds of a feather
YOU and I might be baffled by the fact that Turkey is grouped with South Africa as an unrequited member of the “fragile five” economies that include Brazil, India and Indonesia.
On the face of it, the two countries are worlds apart. One, wracked by insurrection on two frontiers, the other marked by petty political bickering that has yet to provoke even a slap in anger.
The SA government, no matter how hot the rhetoric on its left flank, would not dare to defy its monetary tsars. It quite rightly fears incurring the displeasure of the credit-rating agencies and the global flow of capital that hangs on the words of Moody’s, Standard & Poor’s and Fitch.
Gill Marcus and her team stand outside the ructions of budgets and fiscal policy making. Vitally, the institution that regulates interest rates remains aloof from political rabble-rousing.
President Jacob Zuma and his lackeys have never publicly criticised the central bank’s monetary stance.
Not so in Turkey. That country’s prime minister Tayyip Erdogan, battling to win today’s election vote, said he did not approve of the central bank’s interest-rate policy. Rates must fall to encourage investment, he said.
How daft, and how lucky we are not to have a dunderhead at the top blundering into a field he knows nothing about.
We are familiar with Jim O’Neill of Goldman Sachs, who coined the Bric acronym, and who famously derided the inclusion of an “S” for South Africa in the bloc of emerging-market superstars. Brazil, Russia, India and China had no room for an African upstart, he said.
Perhaps SA’s geographic location inoculates it from the worst northernhemisphere evils
Then, in 2012, O’Neil sprouted a new tip. He named it MIST: Mexico, Indonesia, South Korea and Turkey. Two of those are now deemed “fragile”, so what gives?
One must be thankful for small mercies, I guess. That SA is on the global map means we benefit from the gush of hot money chasing higher yields than it would find in the US, Japan or Europe. However, it also places our economy in the crosshairs, should that flow of capital reverse.
Where do SA markets stand? Standard Bank’s retail equities division reiterated this week that geopolitical ructions place all emerging-market currencies at risk. However, the rand is doing pretty well compared with the Russian rouble, Turkish lira and Polish zloty. Perhaps SA’s geographic location inoculates it from the worst northern-hemisphere evils.
What to buy? Gold is going gangbusters, but what else? Imara Asset Management, a specialist in investing in Africa, reckons “we are turning more optimistic from a long-term perspective on commodity counters, given the favourable outlook for the Chinese and US economies. Resource stocks are trading at a 25% discount to industrial counters in terms of price-toearnings and are likely to rerate relative to the industrial index in due course”.