S. African Company Earnings Up This Year - Asset Manager

Old Mutual Investment Group thinks that banks, insurance companies, and globally diversified groups in South Africa can help dampen the impact of a recession.

South Africa's equity market depends on global economies such as China, Europe and the U.S. If these countries enter a recession, South African equities could be affected.

Asset managers at Old Mutual Investment Group have stated that although South African companies will be affected, their profits will not become negative due to the defensive abilities of certain sectors.

A man, Jason Swartz, who is a portfolio manager for Old Mutual, thinks corporate earnings in South Africa might go up by 3% in March 2024. He spoke about this at a conference by Old Mutual last Wednesday.

Swartz stated that the contrast was huge. The U.S. is expecting a 20% fall in earnings in 2024. However, this percentage is different from a 15% rise in profits that South African companies reported last year.

Swartz said SA earnings have defense, but we can't expect 10-15% in the next year.

Siboniso Nxumalo, the Chief Investment Officer of Old Mutual Investment Group, talked about "defensive components" and shared his positive opinion on banks and insurance companies in South Africa.

FirstRand and Standard Bank, banks in South Africa, have cautious lending policies. This helps them to avoid having too many bad loans.

Nxumalo thinks some companies can withstand recessions like British American Tobacco, Anheuser-Busch Inbev, and Richemont. These companies make most of their money abroad.

The company who looks after assets has left South African companies. The companies that will have to deal with a U.S. recession are the ones who will be affected the most. These companies are miners, small-cap companies, and retailers. This is according to Nxumalo.

Promit Mukherjee and Rachel Savage wrote the report. Jane Merriman edited it.