The Swiss-based global firm UBS AG through its Johannesburg branch, recently listed a basket of 20 stocks that investors should focus on ahead of the 2019 elections on 8 May. Assuming the ruling party achieves a 55-60% win on the day, UBS AG predicts the market will rally in supporting South African assets.
Aveshen Pillay, director of equity derivatives sales and structuring at UBS in Johannesburg, foresees that a victory for the African National Congress should invigorate support for President Ramaphosa and fuel expectations of stronger policy certainty, better management of state-owned companies and an improved outlook growth.
The industries that are expected to experience a boost in their share price are the domestic-based banks and insurers, retailers, locally-focused industrial companies, property firms and telecommunication groups. Pillay mentions that while South African equities look expensive, opportunities exist in certain sectors that’ll benefit from lower bond yields, improved consumer sentiment and attractive valuations.
With the 8 May poll around the corner, the preferred stocks to consider as highlighted by UBS AG in a report dated 16 April and co-authored by Aveshen Pillay include:
Pillay foresees a lower yield environment and lower cost of equity to support performance for banks. He adds that banks should benefit from bolstered consumer sentiment and a positive growth outlook; as well as policy clarity that’ll drive corporate borrowing and investment.
Pillay foresees our domestic-based insurers will benefit from a lower-yield environment, improved consumer sentiment as well as strong market performance.
- Discovery Limited
- Old Mutual Limited
The main player in this sector within the basket of stocks should, according to Pillay, benefit from a renewal of government contracts as well as an improved growth outlook.
- Bidvest Group Limited
Pillay foresees the two major telecomm players will benefit from improved domestic consumer sentiment, attractive valuations and a positive growth outlook.
- Multichoice Group Limited
- Vodacom Group Limited
Pillay foresees the domestic-based retail sector will benefit from improved consumer sentiment and a positive growth outlook. He adds the sector has de-rated and is looking more appealing to investors; where a strong rand should aid in lowering input inflation and supporting margins.
- Pick n Pay Stores Limited
- Shoprite Group of Companies
- Truworths Limited
- Mr Price Group Limited
- Clicks Group Limited
- Foschini Group Limited
Pillay foresees improved consumer sentiment with the additional benefit from the strength of the Rand and lower input costs.
- Tiger Brands Limited
- AVI Limited
Pillay foresees lower yields and a stronger Rand should support share price performance in the short term in the property sector.
- Redefine Properties Limited
- GrowthPoint Properties Limited