<\/p>\n
Morningstar is steering clear of South African stocks in its global portfolios as relatively weak economic growth overshadows cheap valuations.<\/p>\n
That contrasts with the $375 billion asset manager\u2019s overweight stance on emerging-markets, with Brazil and Mexico its top picks outside of of Asia, said Sean Neethling, the firm\u2019s South African investment head.<\/p>\n
The FTSE\/JSE All Share Index has declined more than 4% in dollar terms this year and is poised for its first annual drop since 2022. That compares with a 21% rally for the MSCI emerging-markets equity gauge, which has been propelled mostly by gains for Asian artificial intelligence-related firms.<\/p>\n
Johannesburg has missed out on global fund flows due to lacklustre economic growth and its dearth of exposure to the AI boom, according to Neethling, who oversees about R60 billion ($3.7 billion) in rand- and dollar-based portfolios.<\/p>\n
\u201cIf you look at South Africa at a company-specific level, there\u2019s not many companies that are at the forefront of what\u2019s driving markets right now in artificial intelligence and tech,\u201d Neethling said in an interview. \u201cSouth Africa doesn\u2019t have that growth factor that a lot of other emerging markets have right now.\u201d<\/p>\n
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Africa\u2019s biggest economy has expanded by less than 1% annually for over a decade and the US-Iran war fallout is weighing on manufacturing, trade and mining output. The South African Reserve Bank raised borrowing costs for the second time this year earlier this month, further straining the economy.<\/p>\n
South Africa\u2019s stock-market gains over the past year have been driven by gold and platinum producers, which have lost ground as metal prices pulled back.<\/p>\n
By contrast, Brazil has large firms like Petrobras and Vale S.A. that are linked to different parts of the commodity cycle, as well as well-capitalised banks, Neethling said. Mexico offers an \u201cindustrial-staples mix\u201d with robust companies like bottler Coca-Cola Femsa, he said.<\/p>\n
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China is Morningstar\u2019s strongest investment conviction in emerging markets, and South Korea is another a top bet. The Korean stock market, which has fallen 24% from its June 22 high, is now \u201cattractively priced,\u201d Neethling said.<\/p>\n
While foreign buyers may be wary, South African assets do offer value for rand-based investors, Neethling said. Morningstar is overweight on the nation\u2019s bonds, which have attractive yields relative to emerging-market peers and developed-market debt.<\/p>\n
\u201cFor rand-based investors, South Africa offers really attractive and compelling value, particularly in the bond market, where absolute yields and yields to maturity are among the most attractive in emerging markets, only second to Brazil,\u201d Neethling said.<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#Morningstar #shuns #lowgrowth #South #Africa #favours #Brazil #Mexico<\/p>\n","protected":false},"excerpt":{"rendered":"
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