Stock players willing to risk emerging market investments despite uncertainties on various fronts are looking at volatile countries that are recovering from recent economic setbacks but South Africa, unfortunately, isn’t one of them.
Turkey, Argentina and Brazil have all been mentioned as countries that are expected to engineer turnarounds in 2019.
The fact that Turkey and Argentina recorded trade deficits exacerbated by soaring inflation in 2018 is apparently not enough to scare investors.
And Brazil, although its recent election of the hawkish right-winger Jair Bolsonaro was widely seen as a step towards more political turmoil, appears to be already benefiting from having a ruthless industrialist as its new president.
Sadly South Africa is not cracking the investor nod at this stage mainly because of the upcoming election and persistent revelations in the media about the state of its parastatals, especially Eskom.
Also, high-risk investors from Mobius Capital Partners, Oaktree Capital Group LLC, Research Affiliates and Pimco All Asset Fund agree that some emerging markets look set to have a better year, mainly because they have stabilised their economies, with the exception of South Africa.
But there’s an elephant in the room that affects all countries whose economies are dependent on resource-driven growth around the globe - and one trade partner towers above the rest.
According to finance writers Ye Xie and Ben Bartenstein, “the developing world still has a China problem”.
Quoting strategists at Citigroup Inc and UBS Ag, they said that “the complications are twofold.
“First, China’s trade frictions with the US and Beijing’s mounting corporate debt have dragged growth in the world’s second-largest economy, which buys everything - from South African iron ore to South Korean computer chips.
“Second, China’s government has avoided flooding the economy with a big stimulus.”
-Eugene Goddard
