Old Mutual: South African market currently undervalued

The South African market is currently on edge awaiting news of the outcome of discussions between various political parties. As the clock ticks, investors are anxiously anticipating the formation of a coalition government and the implications it will have on key policies and economic growth in the country. CNBC Africa recently spoke with Jason Swartz, Portfolio Manager at Old Mutual Investment Group, to get his insights on what to expect from these discussions and how the market might react. Swartz highlighted the importance of understanding how the coalition would be formed and which parties would have key committee positions. He mentioned the need to analyze how the government of national unity would deliver on the promises made in party manifestos. With a focus on economic growth and job creation, Swartz noted that both the Democratic Alliance and the African National Congress share common ground in some areas, despite their differences in foreign policy and other key issues. One of the key points Swartz emphasized was the need for the parties to align on driving the economy in a sustainable and balanced manner. While their approaches may differ, finding common ground on strategies to promote long-term growth is crucial for the market. Swartz also touched on the volatility of the South African Rand in recent weeks and how it could react to the announcement of a stable government. From an Old Mutual perspective, Swartz discussed potential scenarios and their impact on market outcomes. In the event of a positive partnership between the ANC and DA, he suggested that South African asset classes could rally, leading to a surge in nominal bonds and domestic-facing equities. On the other hand, in a scenario where a more populist shift occurs, the market reaction would determine buying opportunities for investors. Overall, the uncertainty surrounding the outcome of the discussions has created a sense of anticipation in the market. Investors are closely watching for signals of stability and coherence in the new government's economic policies. As the country awaits the final announcement, analysts like Swartz are preparing for various outcomes and positioning their portfolios accordingly. In conclusion, the impact of the coalition's formation on the South African market remains a key focus for investors. The ability of political parties to find common ground on economic growth and stability will be closely monitored in the coming days.