INN8 Invest on H2 investment strategy

Foreign investors have been net sellers of South African equities and bonds so far this year, with net sales amounting to R93.3 billion and R16.6 billion, respectively. This trend is a stark increase compared to the same period last year, raising concerns about the attractiveness of the South African market. To shed light on this topic, Jennifer Henry, Deputy Chief Investment Officer at INN8 Invest, shared insights in a recent interview with CNBC Africa. Henry acknowledged the challenges facing the South African market, such as sluggish economic growth and sticky inflation. However, she emphasized that there are still opportunities for value in both equities and bonds. She highlighted that many local fund managers see potential in various sectors of the market, including South African-focused stocks and offshore-driven investments. When discussing where value can be found in the local market, Henry pointed to different sectors, such as industrials, resources, and red hedges with offshore revenues. She mentioned specific stocks like The Foschini Group, Mr. Price, and MultiChoice Group as examples of companies offering attractive entry points for investors. Additionally, she noted that quality-oriented stocks in the luxury goods space and resources also present opportunities for growth. In terms of the banking sector, Henry highlighted that banks in South Africa are well-capitalized and of good quality. Despite the current interest rate environment, which sits at around 10.4%, banks are expected to hold up well due to their resilience. She mentioned that even a small change in interest rates could have a positive impact on the sector. Regarding the bond market, Henry discussed the shift in investor sentiment towards shorter-dated paper, reflecting a preference for lower risks. Managers are adjusting their strategies to accommodate the volatility in bonds while focusing on equity opportunities. The weighting of fixed income in portfolios is expected to remain stable, with a slight shift towards equities due to the attractive valuations in that space. In conclusion, while foreign investors have been withdrawing from the South African market, local fund managers like INN8 Invest see potential for growth and value in both equities and bonds. Despite the challenges, there are opportunities to be found in various sectors and specific stocks, signaling hope for the future of the South African market.