In 2017 the JSE all share index had delivered a healthy 20percent return on investments.
The latest Schroders Global Investor Study found that South African investors expect their portfolios to return nearly 13 percent annually in the next five years. This would be 8.4 percent higher than their actual returns over the past five years.
Claire Walsh, a personal finance director at Schroders, said there was a significant disconnect between what South Africans expected to earn in returns over the coming years and the annual rate of return that they were currently achieving.
“Despite actual MSCI index five-year average annual returns over the period 2013 to 2018 (based in rands) being relatively low at 4.4 percent, South African investors expect annual returns to increase by 8.4 percent to 12.8 percent over the next five years,” Walsh said.
According to the study, the average South African investor holds 31 percent in equities, 17 percent in bonds, 21 percent in cash, 15 percent in property funds and 15 percent in alternative investments.
JSE giants such as MTN, Aspen and Tiger Brands declined by more than 35 percent during the year, while a few other well-regarded names fell more than 30 percent.
Market heavyweight Naspers has lost about a fifth of its value since the beginning of the year, while the popular property sector fell by a similar amount.
Herman van Papendorp, the head of investment research and asset allocation at Momentum Investments, said the early part of 2019 could still experience moderately positive equity returns and an outperformance of global equities over bonds,
“Unless there has been some additional undetected questionable financial engineering among the main companies in the listed property sector, it is Momentum Investments’ view that the sector’s positive valuation underpin and some macro improvement in the SA economy point to strong return prospects,” Van Papendorp said.
South Africa’s stock market was set to close the year below the 53000 point mark after plummeting from January’s record high of 61684 points as a Ramaphoria wave swept through the markets.
Old Mutual Investment head of macro solutions, Peter Brooke, said the firm had upgraded its expected long-term real returns and that cheaper valuations meant higher future returns, which were backed by high levels of income that increased certainty
“In a global context, South African bonds look particularly attractive, and a small change in sentiment could boost returns. Consequently, now is not the time for SA investors to go offshore and we have actually been increasing our portfolio weights in South Africa,” Brooke said.
The markets will be fixated on the run-up to and the outcome of the 2019 election.
Nkareng Mpobane, the chief investment officer at Ashburton Investments, said many anticipated that President Cyril Ramaphosa needed to move through the upcoming 2019 election before cementing his ideal cabinet and fully enacting his vision for reform in the country.
“We would only revise our growth estimates at each incremental change. Essentially, given the deep declines in some of our mainstay stocks together with a slightly better mood in the country than previous years, we would support positioning for a recovery in returns when considering the risk asset classes,” Mpobane said.