Ninety One Bullish on South African Equities Despite Iran War Volatility

Ninety One remains constructive on South African equities, arguing that the ongoing conflict in Iran has created opportunities to buy stocks at prices that are lower than justified by their earnings outlook.

While the Middle East conflict is weighing on economic growth and inflation expectations—and mining stocks have been hammered following a sharp decline in precious-metals prices—earnings expectations across South Africa's market have remained largely unchanged, according to Hannes van den Berg, a portfolio manager at the $232 billion asset manager.

Estimated 12-month forward earnings per share for the FTSE JSE All Share Index has edged only 4% lower since the start of the war, according to Bloomberg-compiled data.

Van den Berg noted that several longer-term investment themes continue to support the country's equities, including demand for critical minerals, supply constraints in commodities, and continued investment linked to artificial intelligence infrastructure.

"There are still strong opportunities in resources, financials, and global growth themes," he said. "Those drivers haven't fundamentally changed."

Market Context

Despite a rebound since mid-March, South Africa's benchmark index remains down more than 5% since the start of the war—a sharp turnaround after the gauge logged 12 straight monthly gains through February, the longest streak on record.

The precious metals and mining sector, which accounts for a quarter of the index's weighting, has tumbled 13% since the beginning of March, wiping out most of this year's gains as gold and platinum prices slumped. The decline came amid a broad selloff of emerging-market stocks as investors fret that the spike in oil prices will fuel inflation, forcing central banks to raise interest rates.

Positioning and Opportunities

Ninety One remains constructive on miners, along with banks and insurers, while maintaining caution on consumer-facing stocks, particularly discretionary retailers.

Van den Berg noted that geopolitical shocks often create pricing dislocations—a dynamic the firm has previously exploited during events such as pandemic-driven selloffs and earlier war-related volatility.

"These events are not enjoyable, but they do create opportunity. Our job is to take advantage of mispricing, within a disciplined framework."

Ninety One is not alone in seeking those opportunities. A net 81% of fund managers in a Bank of America survey conducted between April 2 and 9 see more buys than sells in South African stocks, up from 69% in the previous poll. Positioning is moving out of overweight cash and back into local equities, with half of respondents viewing South African equities as undervalued.

"We stick to fundamentals and at this stage there's not enough that makes us materially change our view on the fundamentals of the stocks we own in our portfolio," Van den Berg said.

Market Sentiment: 

The sentiment is cautiously optimistic, reflecting a conviction that the war-induced selloff has created attractive entry points rather than signalling a structural deterioration. Ninety One's analysis—earnings expectations down only 4% while the index has fallen over 5%—suggests valuations have become more compelling. The asset manager's focus on resources, financials, and AI-linked infrastructure themes aligns with longer-term structural drivers that remain intact. The BofA survey data showing 81% of fund managers seeing more buys than sells and half viewing local equities as undervalued indicates that Ninety One is not alone in this assessment. However, caution is warranted: the precious metals and mining sector has been particularly hard hit, and consumer-facing stocks face headwinds from potential inflation and higher rates. The key risk remains geopolitical escalation, but Ninety One's disciplined, fundamentals-based approach provides a framework for navigating volatility. For long-term investors, this represents a classic "fear versus fundamentals" opportunity, with the firm betting that the market has overreacted to the conflict while the underlying earnings picture remains stable.

Disclaimer:
This content has been generated using AI technology and is intended for informational purposes only. While efforts have been made to ensure accuracy and relevance, this text should not be considered professional advice or an official statement. Always verify information from authoritative sources before making any decisions. This is not financial advice.