How to Position Portfolio’s Now That the Results Are Out

To summarise, our base-case scenario (at a 55% probability), expected the ANC to get 58%-plus of the vote. With the final tally within a whisker of this scenario, we believe that the current ‘repair’ scenario should maintain its momentum, with Ramaphosa emboldened and seen as having received the required mandate from voters to solidify his position and to steer ahead unfettered with his anti-corruption and growth agenda. Ramaphosa is expected to assemble a new cabinet (NB 21 MAY), with few Zuma cronies or compromised individuals. He is also expected to make headway in managing divisions within the ANC, gaining the support of the ANC caucus and the NEC, as he intensifies the fight against corruption and state capture.

This, in turn, will be positive for the local economy and we are likely to see more inflows of foreign direct investment (FDI) and local investment into SA as ANC policies are (hopefully) clarified, especially those related to expropriation without compensation (EWC), the nationalisation of the SA Reserve Bank (SARB) etc. A more certain future overall, with Ramaphosa perhaps serving two terms, boosting the JSE (bar any external offshore factors) and the rand strengthening. Here we recommend high exposure to SA Inc. shares, especially the quality counters where foreigners take their exposure.

Hence, we are maintaining meaningful exposure to SA Inc. shares, but retaining a diversified portfolio. Importantly, investors should be ready to react as the SA political drama unfolds. SA has serious structural issues and the advances made in solving these are equally important. It should also be borne in mind that many of the factors impacting equity markets are global in nature and the SA political outcome is just one of the contributors.

Source: Anchor