POSITIVE economic data coming out of China could result in “decent real returns” for South Africa’s dual-listed companies, leading analysts said on Sunday.
This comes as the JSE reached yet another milestone, nudging closer to 41,000 points, as a brighter outlook on economic growth for the US and China raised investor appetite for riskier assets such as equities.
On Friday, the JSE all-share index closed 0.49% higher at a record 40‚892 points, led by resources counters.
“Prices are at … a high but price-to-earnings ratios are low compared to historic levels in 2008, and this provides insurance against any possible sell-offs,” according to independent analyst Ian Cruickshanks.
Momentum Asset Management senior portfolio manager Wayne McCurrie said resources were expected to lead the charge, fuelled by bulk commodities demand from China.
“Events that will drive the local bourse are twofold. On the one hand, you have excess cash flow in the market as a result of lower interest rates, and on the other hand you have got better than expected economic data coming out of China and the US,” he said.
Sanlam Investment Management equities head Patrice Rassou said SABMiller and Richemont were among companies expected to benefit from growth in consumer spending in China. The world’s second-biggest brewer and joint venture partner CR Snow had launched a $863m bid for Kingway Brewery as part of plans to expand in the Chinese market.
China passed the US to become the world’s biggest trading nation last year. Its increasing influence threatened to disrupt regional trading blocs, Goldman Sachs management division chairman Jim O’Neill said last week.
The US trade deficit shrank to $38.5bn in December, the lowest level in nearly three years, according to the commerce department.
Mr Rassou said markets were opening up, reinforcing the feeling that the global economy might grow at a slightly higher pace than had been initially expected.
“We are seeing a return in risk appetite. We are seeing money return into value shares,” he said.
US retail sales were expected to have grown last month on an improving job market, economists said before the release of a report this week.
Another report may show that factory production in the US is expanding.
With Bloomberg