20 shares that may rally after the election
If the ANC secured more than 55% of the vote in next week's election, it could bolster a number of SA-focused shares, the Swiss investment bank UBS has said in a new report.
The bank believes a strong win will give president Cyril Ramaphosa a mandate to execute government policies that will strengthen the economy and benefit investors. That, in turn, will bolster the rand, bond yields and consumer sentiment.
The local market has come under pressure in recent years as corporate earnings disappointed amid a weak economy. While the average price-earnings ratio of the JSE's all share index reached 23 in 2016, it is currently below 18.
Here are some of UBS’s preferred South African stocks in the lead-up to the election:
Banks: Absa, Capitec, FirstRand and 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 an additional driver for corporate borrowing and investment," according to the UBS report.
Insurers: Discovery, Old Mutual and Sanlam.
Industrials and telecommunication groups: Bidvest should benefit from a resumption of government contracts, with improved growth outlook supporting logistics business, says UBS. Multichoice. Vodacom is "the most exposed to the South African consumer, with attractive valuations".
Retail sector: Pick 'n Pay, Shoprite, Truworths, Mr Price, Clicks and The Foschini Group. UBS says the sector is looking attractive relative to its historice valuations.
Food producers: Tiger Brands and AVI. "Expect to see additional benefit from currency strength and lower input costs."
Property: Redefine and GrowthPoint.
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