Press centre
16 June 2009
Post election - what are the prospects for South Africa?
- AIC collates investment company managers’ views on the region
With Jacob Zuma being elected as the new President of South Africa and the British and Irish Lions venturing south to challenge the springboks, the Association of Investment Companies (AIC) has spoken to managers with the largest holdings in the region to see what the outlook is for South Africa.
What does the future hold for South Africa?
The managers generally believe that the long term prospects for South Africa are positive; the country is mineral rich and the cities are urbanising rapidly creating good investment opportunities. However, although the outlook is positive, the managers are divided in their view on the future political stability of South Africa.
Claire Simmonds, Client Portfolio Manager, JPMorgan Emerging Markets Equity Group said: “We remain fundamentally positive on the long term potential for South Africa, given the structural tailwinds to growth from urbanisation, industrialisation and infrastructure development. Additionally, we believe South Africa is in a better position to weather the current global crisis given the relative health of their banking system and the ability to pursue aggressive monetary and fiscal policy stimulus reflecting improved fundamentals.
“In the near term, we believe that volatility will continue in South Africa driven largely by global concerns and commodity prices. Over the coming months we expect markets to reward companies that can grow their earnings in a sustainable fashion in an environment of slower global growth. We continue to favour the consumption theme and selected mining companies in this market.”
Evy Hambro, manager of the BlackRock World Mining Investment Trust said: “South Africa has always been a very resource rich country and as such we have held significant exposure to their assets in our resource portfolios for many years. We continue to believe in their potential and look forward to evaluating future opportunities.”
What impact will the new President have?
Andrew Lister, one of the investment team of Advanced Developing Markets plc, said: “We believe the South African market has reasonable prospects at the moment but see more compelling opportunities elsewhere within emerging markets, e.g. Brazil. We currently have a relatively low holding in South Africa, in part due to the political uncertainty that comes with the election of Jacob Zuma as President. In the long term, we believe that the African continent has huge potential. South Africa will have a key role to play in its development.”
Claire Simmonds, Client Portfolio Manager, JP Morgan Emerging Markets Equity Group believes that the political outlook is a positive story: “The continuity of certain economic policies and overall clarity are likely to be a positive to look forward to. From a longer-term perspective, a focus on education, infrastructure and health care have to be positive. “
Annabel Brodie-Smith, Communications Director, AIC said: “Doubts linger over the political stability of South Africa but it is encouraging that the managers believe there is a compelling case for long-term investment and prosperity in this country. Investment companies are especially suitable for investing in specialist areas such as South Africa as their closed-ended structure means fund managers can take a long term view of the market, without having to sell their most liquid stocks to meet redemptions.”
Performance of investment companies with highest exposure to South Africa
Share price total return on £100 to 31 May 2009 (all figures minus 3.5% charges)
| Duration |
|
|
3 months |
6 months |
1 year |
5 years |
10 years |
| Average investment company |
|
|
117.77 |
112.78 |
72.31 |
137.64 |
154.13 |
| Fund |
Sector |
% holding in South Africa |
|
|
|
|
|
| BlackRock World Mining |
Sector Specialist: Commodities and Natural Resources |
12 |
142.61 |
162.41 |
54.94 |
231.73 |
670.3 |
| JPMorgan Emerging Markets |
Global Emerging Markets |
12 |
132.21 |
135.74 |
76.9 |
271.95 |
346.12 |
| Advance Developing Markets |
Global Emerging Markets |
4 |
125.57 |
126.33 |
67.09 |
206.66 |
304.25 |
| BlackRock Commodities Income |
Sector Specialist: Commodities and Natural Resources |
3 |
124.41 |
144.94 |
58.25 |
- |
- |
| Mid Wynd International |
Global Growth |
3 |
112.76 |
107.21 |
76.02 |
131.54 |
158.76 |
| Principle Capital |
UK Growth |
3 |
97.94 |
156.24 |
64.65 |
- |
- |
| Templeton Emerging Markets |
Global Emerging Markets |
3 |
144.94 |
152.64 |
81.12 |
283.1 |
132.66 |
| Bankers |
Global Growth |
2 |
109.64 |
108.7 |
78.45 |
145.7 |
153.63 |
| BlackRock New Energy |
Sector Specialist: Environmental |
2 |
121.34 |
123.15 |
53.75 |
171.89 |
- |
| British Assets |
Global Growth & Income |
1 |
121.14 |
144.4 |
78.35 |
119.32 |
109.05 |
-Ends-
Notes to Editors
1.The Association of Investment Companies was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed ended investment companies which are traded on the London Stock Exchange, AIM and Euronext; incorporating investment trusts and other closed ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help Members add value for shareholders over the longer term. The AIC has 345 members and the industry has total assets of approximately £76 billion.
2. Discrete annual returns – share price total return less 3.5% charges
| Performance Measure |
PriceTotRe |
PriceTotRe |
PriceTotRe |
PriceTotRe |
PriceTotRe |
| Performance From |
31/05/2008 |
31/05/2007 |
31/05/2006 |
31/05/2005 |
31/05/2004 |
| Performance To |
31/05/2009 |
31/05/2008 |
31/05/2007 |
31/05/2006 |
31/05/2005 |
| Duration Years.Months |
1 |
1 |
1 |
1 |
1 |
| Overall Weighted Average Ex VCTs |
72.31 |
91.58 |
118 |
124.13 |
119.27 |
| BlackRock World Mining |
54.94 |
126.04 |
142.99 |
176.33 |
115.11 |
| JPMorgan Emerging Markets |
76.9 |
114.01 |
135.58 |
143.37 |
138.37 |
| Advance Developing Markets |
67.09 |
116.14 |
126.4 |
145.71 |
124.86 |
| BlackRock Commodities Income |
58.2 |
146.21 |
122.1 |
- |
- |
| Mid Wynd International |
76.02 |
100.15 |
107.91 |
128.52 |
108.04 |
| Principle Capital |
64.65 |
42.01 |
116.91 |
- |
- |
| Templeton Emerging Markets |
81.12 |
124.08 |
134.04 |
139.2 |
130.73 |
| Bankers |
78.45 |
95.95 |
120.52 |
122.95 |
113.28 |
| BlackRock New Energy |
53.75 |
110.96 |
130.79 |
188.23 |
101.52 |
| British Assets |
78.35 |
85.15 |
120.36 |
111.6 |
115.47 |
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