Bank of America views local equity markets as the most attractive in the Eastern Europe, Middle East and Africa region.
Bank of America again ranked the South African equity market as the most attractive in the Eastern Europe, Middle East and Africa (EEMEA) region, with its top 20 stocks also dominated by 12 local stocks.
The investment bank examines markets on indicators including profit growth, price-to-earnings ratio (an indicator of how expensive shares are), current share valuations compared to historical levels, dividends, as well as how much emerging market funds are over- or underweight in equities.
In a report released this week, South Africa was named the most attractive EEMEA equity market with a score of 83 – well ahead of its nearest competitors, Hungary (66) and Turkey (57), and extending its previous lead.
Top-down ranking of EEMEA markets (100=best, 0=worst)
BofA Global Research estimates
EMEA markets: top-down ranking
DataStream, FactSet, Bloomberg, EPFR, BofA Global Research
Bank of America's EEMEA equity strategists noted:
South Africa's number‑one position is based on a strengthening dividend profile, supportive valuations relative to history and a growing concentration of high-quality material and financial stocks, even as global investors grapple with increased geopolitical uncertainty. The findings come at a time when emerging market flows are becoming more selective, making South Africa's continued leadership in a volatile global environment particularly noteworthy.
After a record-long 12 consecutive positive months, the US-Israel war over Iran abruptly ended the South African stock market rally.
The local market surged more than 40% in the past year, driven by mining shares – but since the start of the war in late February, the JSE has seen a massive outflow of foreign investment.
This was in part due to risk-averse investors fleeing to safer investments, but it was also a reflection of SA's dependence on fuel imports and the impact of skyrocketing prices on inflation and economic growth.
Emerging market funds sold a net $121 million of SA equities in the first three weeks of March, a Bank of America report shows. By comparison, the fund invested $286 million in Israel, which launched military attacks on Iran, and $43 million in Saudi Arabia during the same period.
Yet, when Bank of America examined EEMA equities on criteria such as valuation, profit growth, price-to-earnings ratios and dividend yields, 12 of the top 20 most attractive stocks were listed on the JSE.
The list includes Northam, Siboney, Ninety One, Momentum, Investec, AngloGold Ashanti, Harmony, Sasol, Gold Fields, Telkom, Centum and Implats.
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