Always look on the bright side of the JSE, says chipper PSG
Don't be silly chumps, the market is offering the best value it has since 2008. See, not so bad once you’re up
The JSE, which is on track for its worst year in a decade, can still provide good returns for investors, says PSG Asset Management.
The asset manager, which has more than R47bn in assets under management, said the key is to look beyond blue chip stocks because there is a myriad of “above average” companies trading at about a 55% discount of their true value.
“Where there’s fear, you find the best prices, you find cheap assets,” said Tyrone Green, manager of PSG’s diversified income fund.
PSG’s optimism about SA bonds and equities comes at a time when the JSE is down 12.37% year-to-date and has not delivered inflation beating returns in five years. A number of asset managers are increasing their offshore allocation in search of better returns.
Statistics from the Association for Savings and Investments in SA show that total industry flows – excluding funds of funds and money market funds – have shrunk from quarterly highs of between R50bn and R60bn five years ago to R32bn in the second quarter of 2018.
SA’s low equity multi asset funds, in particular, have recorded negative net flows since early 2017.
Green said even though SA is taking a beating on all fronts – the technical recession, weak exchange rate and business confidence that is at 40-year lows – the discounted share prices of companies offered attractive opportunities. Likewise SA bond yields, which are at heights not seen since the 2008 global economic crisis, also offered higher real returns.
“It’s these times that give us opportunities. There’s a lot of fear that has already been priced in,” said Green.
With a 20-year government bond yield now at 10.5%, PSG said it was providing around a 5% return above inflation. The asset manager now holds 46.4% in SA bonds on its fixed income fund portfolio, of which 14.8% is in government bonds.
“We can now buy inflation-linked bonds at a 3% real yield. The last time we could do that was in 2008,” said Green.