Johannesburg - Foreign investors are loving the change of leadership in South Africa, embarking on a stock-buying spree.
Foreigners have been net buyers of Johannesburg-traded stocks for the past 10 days, according to figures from the exchange operator, the longest streak of purchases since October. Naspers [JSE:NPN], the media and technology giant, was the most-bought share on seven of those days.
Jacob Zuma’s resignation as president and his replacement by Cyril Ramaphosa, sworn in on February 15, has fuelled optimism among investors that management of South Africa’s economy will improve.
The rand has strengthened 12% against the dollar since Ramaphosa won a December contest to lead the ruling African National Congress, more than any other currency. Foreigners have spent a net $980m on stocks since February 7.
“Without question, the shift in sentiment with Zuma’s resignation and the appointment of Ramaphosa would have driven that,” Adrian Saville, chief strategist at Canon Asset Managers, said by phone from Johannesburg. “The strong rand and appetite for long-dated bonds also works in the banking sector’s favour.”
South African long-term bond prices have risen, cutting the yield on government debt due in 2037 by 130 basis points since November to a 17-month low. Ramaphosa will bring greater focus to improving governance and strengthening economic and fiscal policy, Fitch Ratings said this week.
“If you’re looking for a portfolio investment across the South African economy, retailers are an obvious way to get that exposure, but banks are arguably an even better way - not only do you get the broad-based exposure, you also get the benefit of a levered effect that bank performance gets stronger with the economy,” Saville said.
Buying in Naspers may be spurred by foreign investors, emboldened by Ramaphosa’s rise to power, seeking to gain from the discount between shares in the South African company and Hong Kong-traded Tencent, in which it owns a 33% stake, said Saville.
“Perhaps a renewal in confidence in South Africa encourages investors to seize that arbitrage opportunity, whereas before they might have taken the political setting as a negative,” Saville said.
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