Economic growth the biggest risk for Namibia
Participants ranged from listed and unlisted local asset managers in Namibia, as well as local incubators.
THEO KLEIN
Local fund managers see economic growth as the biggest tail risk for Namibia, followed by social discontent and political instability.
A survey was conducted and split in three categories, overall market expectations, detailed asset class expectations and Namibian economic expectations.
Regarding the Namibian economy in 2022, majority of fund managers see the USD/ZAR exchange rate at 16.01 to 16.50 and inflation at 4% to 5%.
In addition, interest rates are expected to increase between, between 50 and 75 basis points (bps), global oil prices at US$71 to US$80, private sector credit extension to average 3% to 4% and gross domestic product (GDP) growth at 3% to 4%.
When asked about Covid-19 vaccinations, most managers expect Namibia to reach its 60% target only by end of 2026.
NSX
Local managers expect trading on the Namibian Stock Exchange (NSX) to be slightly muted as 47% of managers anticipate their trading activity to be in line with 2021.
Moreover, 40% of them say it will be in line with pre-Covid trading levels. This will likely keep liquidity levels low in 2022.
50% said their Inflation Linked bonds (ILBs) trading will improve slightly from pre-Covid levels, 21% will be in line with pre-Covid levels and 14% will be in line with 2021.
Paying special dividends comes out at top amongst preferred corporate actions amongst managers, followed by expansions in Namibia and holding onto cash and wait.
Furthermore, 53% of managers agree that Environmental, Social and Governance (ESG) considerations should influence strategic decisions of locally listed companies, whereas 27% see ESG pressure coming from investors and 20% see ESG more as a mandatory requirement than a personal choice.
Surprisingly, 20% of managers are considering incorporating cryptocurrency exposure to their unit trust funds, whereas 67% they won’t and 13% are legally forbidden to do so.
Almost no one believes Bitcoin is the new digital gold, with only one respondent saying it is. Should a new NSX listing take place in 2022, managers would like to see companies from the ICT, agriculture, industrial, healthcare and energy sectors. Some managers do not want another financial company to list.
Some suggestions for companies to list on the NSX include Namibian Packaging, Pupkewitz, Lady Pohamba Hospital, Namib Mills, FabuPharm, Gondwana, NamPower and NamPharm.
About 70% of managers do not believe the government’s green hydrogen strategy will deliver economic growth, citing execution or implementation concerns, lack of funding and human capital, distance to export markets, limited job creation and diverting focus away from more pressing matters such as food security were some of the reasons provided by managers. While 30% believe green hydrogen will bring economic growth, they still raised concerns which included the fact that other projects could also be looked at, it is a long-term plan and won’t bring short-term solutions and they are not sure if the average man on the street will benefit. Asked if they would invest in the green hydrogen project as part of their unlisted investment mandate, 57% of managers said they would not (43% said yes).
Investment
Looking at return expectations for 2022, majority of managers see between 6% to 10% growth on the NSX, 5% to 10% on local government bonds, 5% to 10% on local property, 5% to 6% for cash market rates and 5% to 10% for gold bullion.
Most managers are looking at value stocks, followed by growth and momentum when considering stocks on the Johannesburg Stock Exchange (JSE) and global markets. 62% of managers believe that banking on cheap stocks to outperform growth stocks remains a valuable investment proposition.
Interestingly, no one vouched for stay-at-home stocks (companies who provide technology services and online retailers that benefit when people work remotely from home).
Firstrand was picked as the most attractive stock on the NSX, with Oryx coming in last as the least preferred stock. Only 10 out of 15 managers answered this question.
Based on the results, it seems local asset managers are leaning to a slightly optimistic outlook on the economy’s growth for 2022, with forecasts of various macroeconomic indicators painting a brighter picture. If manager expectations are to materialise, we will see the NSX performance down from 18% in 2021 to between 6% and 10% in 2022. Also, financial sector stocks will likely drive the local bourse higher this year, based on managers’ top picks.
Local fund managers see economic growth as the biggest tail risk for Namibia, followed by social discontent and political instability.
A survey was conducted and split in three categories, overall market expectations, detailed asset class expectations and Namibian economic expectations.
Regarding the Namibian economy in 2022, majority of fund managers see the USD/ZAR exchange rate at 16.01 to 16.50 and inflation at 4% to 5%.
In addition, interest rates are expected to increase between, between 50 and 75 basis points (bps), global oil prices at US$71 to US$80, private sector credit extension to average 3% to 4% and gross domestic product (GDP) growth at 3% to 4%.
When asked about Covid-19 vaccinations, most managers expect Namibia to reach its 60% target only by end of 2026.
NSX
Local managers expect trading on the Namibian Stock Exchange (NSX) to be slightly muted as 47% of managers anticipate their trading activity to be in line with 2021.
Moreover, 40% of them say it will be in line with pre-Covid trading levels. This will likely keep liquidity levels low in 2022.
50% said their Inflation Linked bonds (ILBs) trading will improve slightly from pre-Covid levels, 21% will be in line with pre-Covid levels and 14% will be in line with 2021.
Paying special dividends comes out at top amongst preferred corporate actions amongst managers, followed by expansions in Namibia and holding onto cash and wait.
Furthermore, 53% of managers agree that Environmental, Social and Governance (ESG) considerations should influence strategic decisions of locally listed companies, whereas 27% see ESG pressure coming from investors and 20% see ESG more as a mandatory requirement than a personal choice.
Surprisingly, 20% of managers are considering incorporating cryptocurrency exposure to their unit trust funds, whereas 67% they won’t and 13% are legally forbidden to do so.
Almost no one believes Bitcoin is the new digital gold, with only one respondent saying it is. Should a new NSX listing take place in 2022, managers would like to see companies from the ICT, agriculture, industrial, healthcare and energy sectors. Some managers do not want another financial company to list.
Some suggestions for companies to list on the NSX include Namibian Packaging, Pupkewitz, Lady Pohamba Hospital, Namib Mills, FabuPharm, Gondwana, NamPower and NamPharm.
About 70% of managers do not believe the government’s green hydrogen strategy will deliver economic growth, citing execution or implementation concerns, lack of funding and human capital, distance to export markets, limited job creation and diverting focus away from more pressing matters such as food security were some of the reasons provided by managers. While 30% believe green hydrogen will bring economic growth, they still raised concerns which included the fact that other projects could also be looked at, it is a long-term plan and won’t bring short-term solutions and they are not sure if the average man on the street will benefit. Asked if they would invest in the green hydrogen project as part of their unlisted investment mandate, 57% of managers said they would not (43% said yes).
Investment
Looking at return expectations for 2022, majority of managers see between 6% to 10% growth on the NSX, 5% to 10% on local government bonds, 5% to 10% on local property, 5% to 6% for cash market rates and 5% to 10% for gold bullion.
Most managers are looking at value stocks, followed by growth and momentum when considering stocks on the Johannesburg Stock Exchange (JSE) and global markets. 62% of managers believe that banking on cheap stocks to outperform growth stocks remains a valuable investment proposition.
Interestingly, no one vouched for stay-at-home stocks (companies who provide technology services and online retailers that benefit when people work remotely from home).
Firstrand was picked as the most attractive stock on the NSX, with Oryx coming in last as the least preferred stock. Only 10 out of 15 managers answered this question.
Based on the results, it seems local asset managers are leaning to a slightly optimistic outlook on the economy’s growth for 2022, with forecasts of various macroeconomic indicators painting a brighter picture. If manager expectations are to materialise, we will see the NSX performance down from 18% in 2021 to between 6% and 10% in 2022. Also, financial sector stocks will likely drive the local bourse higher this year, based on managers’ top picks.
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