Country ‘Well Positioned’ to Survive Turmoil

18 May 2011

THIS year should prove to be a relatively positive environment overall for risk assets, which should also benefit South Africa and Namibia as emerging markets, Vivienne Taberer, portfolio manager at Investec Asset Managers, said at a briefing on Monday.

“As events of the last couple of days suggest, 2011 is likely to be remembered as a choppy year,” Taberer said. Despite all the ups and downs, Investec remains optimistic, she said.

Taberer said Namibia and South Africa are relatively well positioned, given that the long-term dynamic that favours developing markets over developed markets remains intact.

“It also means that emerging market currencies are likely to remain firm, thanks to the structural support from strong balance of payment positions, better growth, sound fiscal policy and higher rates.

“Even though we may believe the currency appears extended, it is likely to move in tandem with the overall trend in emerging market currencies and so should stay stronger for longer,” Taberer said.

“Of course, a stronger currency does have benefits, as it assists in keeping inflation in check; on the downside, it will curb growth and mean that the export recovery won’t be as strong as we would have hoped. In this environment, we expect sustainable, but below trend growth for the next year or two,” she said.

Against the backdrop of a relatively lacklustre credit demand but rising inflation due to escalating global food and energy prices, interest rates will have to rise, Taberer said.

“However, we do believe this cycle will be more muted than previous cycles.

“Although money market rates will move higher, the steepness of the yield curve means bonds do offer some protection, as they already have quite a lot priced in,” she said.

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