OWN CORRESPONDENT, Johannesburg | Monday
SOUTH Africa’s mediocre performance in two authoritative reports on risk and economic performance in emerging markets could cost it dearly, as large international portfolio managers channel investments elsewhere in preference to the South African market.
In the first report, international brokering giant Merrill Lynch says South Africa’s recent macro-momentum was only slightly positive because growth in industrial production, exports, and the country’s economy were “not very exciting” to the group’s portfolio managers.
Merrill Lynch considers the following to be macro-momentums: growth performance, interest rate movements, growth in industrial production, consensus predicted growth, trade balance, and international exchange reserves.
The company manages more than $8 trillion in developing countries and says that its portfolio managers currently prefer to invest less than the average in South Africa, until local business starts to look more exciting.
In the second report, the Economist Intelligence Unit (EIU), a subsidiary of the authoritative magazine The Economist, calculates the investment risks in 93 countries according to a variety of factors that include political stability, stability of the country’s current account, debt and regulatory processes.
Out of a possible maximum risk of 100 points, South Africa is awarded just over 40 points – considerably better than the countries at the weakest end of the scale, but well off the scores of countries like Botswana, Hong Kong, Singapore and Taiwan as far as stability and low risk go, according to a report in business daily Sake Beeld.
Myanmar and Zimbabwe both received 80 points, making them the riskiest countries in which to invest. The safest developing countries for investments are Singapore, Taiwan, South Korea and Chile.
The broking firm chose Brazil as its foremost developing market, said Sake Beeld, with Russia second and China third, explaining that the performance of most Latin American countries’ economies are the reason for Brazil’s top index position.
Merrill Lynch said it will maintain its 9% exposure of its global investment portfolio in developing countries in South Africa.