Johannesburg
- Over-defensive South African money managers who have missed their performance
benchmarks this year would be better positioned had they read signals that
banking stocks were showing greater resilience than expected, according to
Richard Schellbach, equity strategist at Citigroup.
This time
last year, the outlook for South Africa was starkly different, with the threat
of economic recession looming, Schellbach said in an interview in Johannesburg.
“But at the end of the first quarter, commodity prices were rallying, the
currency was strengthening and inflation had come down. People started
realizing that there wasn’t going to be a rate-hiking cycle; we’re going to
avoid a recession.”
“This was
not the point in the cycle to be short banks,” he said. “The average equity
manager has struggled with performance this year; they’ve underperformed their
benchmark and that’s likely because they’ve been positioned too defensively.”
Read also: SA banks 'able to deal with downgrade'
Johannesburg’s
banking index has rallied 23 percent year to date, in contrast with a 16
percent slump in the benchmark retailers gauge. South African lenders have
remained well-capitalised and while non-performing loans are rising, they have
tightened credit and lowered their risk appetite, Schellbach said. And they
could have further to run.
“As we look
into 2017, the top-down conditions for emerging-market banks’ outperformance to
continue remain in place.”
BLOOMBERG