Banks and retail shares likely to climb
The economic outlook has improved and cyclicals will respond, say observers
South African stocks are trading at their cheapest levels since 2012, with retailers poised to follow banks higher and deliver share price outperformance this year, says Richard Schellbach, equity strategist at Citi. Schellbach said cyclical sectors, such as banks and retailers, responded well to even minor positive adjustments in economic data. Although weak, a pick-up in SA’s economic growth boded well for cyclical stocks, said John Orford, portfolio manager at Old Mutual Investment Group’s MacroSolutions. A more stable economic outlook — driven by better global growth, a recovery in commodity prices and an improved domestic inflation outlook — would support asset classes sensitive to interest rates, such as bonds, property, retailers and banks, said Orford. Old Mutual expected two 25 basis point interest rate cuts in the second half of 2017, followed by a third in 2018, said Johann Els, senior economist at Old Mutual Investment Group. A significantly improved maize crop had drive...
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