Picture: MICHAEL ETTERSHANK
Picture: MICHAEL ETTERSHANK

Nairobi — An election outcome that sees the ANC winning 55%-60% of the vote could boost shares in banks and insurers, retailers, locally focused industrial companies, property firms and telcos, according to UBS.

A victory of that magnitude for the ANC in the May 8 poll is a result seen by many as enabling President Cyril Ramaphosa to lead “in a less constrained way”, said Aveshen Pillay, director of equity derivatives sales and structuring at UBS in Johannesburg.

Last week, UBS listed two products on the JSE that allow investors to position for a new surge of “Ramaphoria” after the election. A strong showing for the ANC may trigger a rally in SA assets on expectations of greater policy certainty, better management of state-owned companies and an improved outlook for growth, Pillay said in an e-mailed response to questions.

UBS has listed a basket of 20 stocks correlated to rand strength, including financials, retailers, industrials, property and telcos. The second of the six-month products is based on a group of 10 domestically focused, “SA Inc” stocks tipped to benefit most from lower bond yields, a stronger currency and improved growth and consumer sentiment.

While SA equities look expensive, “opportunities exist within sectors such as financials and property stocks benefiting from lower bond yields, and retailers and food producers on attractive valuations relative to history and exposed to the consumer,” Pillay said.

SA’s benchmark index dropped 0.4% as of 2.49pm in Johannesburg on Monday, trimming its advance this year to 11%.

Here are some of UBS’s preferred SA stocks in the lead up to the election, detailed in an April 16 report co-authored by Pillay:

Here are some of UBS’s preferred South African stocks in the lead up to the election, detailed in an April 16 report co-authored by Pillay:

Banks: Absa, Capitec Bank, FirstRand, Standard Bank. “Expect lower yield environment and lower cost of equity to support performance for local banks. Banks should also benefit from improvement in consumer sentiment and growth outlook. Policy clarity could provide additional driver for corporate borrowing and investment”

Insurers: Discovery, Old Mutual and Sanlam. To benefit from the “lower-yield environment, improved consumer sentiment and strong market performance”

Industrials and telcos: Bidvest should benefit from a resumption of government contracts, with improved growth outlook supporting logistics business. Multichoice is seen benefiting from improved domestic consumer sentiment and growth outlook. Vodacom is most exposed to the SA consumer, with attractive valuations

Retail sector: Pick n Pay, Shoprite, Truworths, Mr Price, Clicks and TFG to benefit from improved consumer sentiment and growth prospects; sector has de-rated and is looking attractive relative to history. “Strong rand should help lower input inflation and support margins”

Food producers: Tiger Brands and AVI's strong gearing to the local consumer should support the sector on improved consumer sentiment. “Expect to see additional benefit from currency strength and lower input costs.”

Property: Redefine Properties and GrowthPoint Properties. Lower yields and a stronger rand should support share price performance in the short term; longer term benefit from improvements in demand for property space

With Renee Bonorchis.

Bloomberg