Every year, millions of working people spend several hours per week investing in all categories of assets. From stock shares and foreign exchange pairs, to options and futures, people who put their money at risk often turn to South Africa’s markets to take advantage of a growing economy that is one of the most resilient and stable on the entire continent. What should traders keep in mind as they take positions in equities, commodities, precious metals, and other South Africa based investments? A complete list would fill hundreds of pages and include forecasts for each of the nation’s many asset classes. Here’s the short version, based on the kinds of securities people add to their portfolios.
Domestic Corporate Stocks
You may wonder what 2022 is going to be for South African traders. The first thing to do is examine the local stock market, represented by the JSE, Johannesburg Stock Exchange. Not only is the JSE one of the most active boards in the world, but it is also the busiest exchange on the entire continent. Recent announcements by the national government are likely to have serious effects on the exchange’s index, the FTSE/JSE, as well as some of the leading corporations listed on the board.
In addition to recent low growth economic forecasts, prevailing inflation rates in excess of 4.5 percent could put a damper on securities activity, particularly for growth stocks. Inflation generally hurts growth-based companies and supports value-based ones. However, it’s essential for many to stay current on economic, financial, and government news during 2022 due to inherently volatile political, pandemic-related, and financial scenarios.
Forex Pairs That Include the Rand (ZAR)
There are two ways for forex enthusiasts to analyze opportunities in 2022. The first significant fact is that the rand has done well over the long haul, namely the past 10 years. With several large peaks and deep valleys, it has always bounced back to continue a steady climb, albeit a slow one. That’s the long view.
The other strategy for forex traders is to use recent news, both good and bad, to follow the ups and downs of the rand against other major currencies. Assuming this year will be one of very slow growth, modest inflation, and a rebound of domestic commodities markets, the rand could do well against the dollar, the yen, and the euro. Forex traders who prefer low volatility and have average risk tolerance might trade ZAR against other major currencies. For those who can endure more risk and like to ride the daily price changes, pairs that match the rand with weaker currencies could be a way to scalp short-term profits within very narrow time frames.
South Africa Government 10-Year Bonds
Bond enthusiasts all over the world often seek out South African government bonds for two reasons. First, they’re relatively stable. Second, they pay outsize interest, currently to the tune of almost 10 per cent. Compared to most developed nations’ bond interest, 10 per cent is in the nearly unheard-of category. However, for 2022, it’s significant to note that South Africa’s economy is only expected to grow at a rate of about 2.4 per cent or less. While that’s not a danger zone, it’s on the low end. If your tolerance for risk is higher than normal and you like the idea of adding a few high-interest government bonds to your portfolio, consider South Africa’s 10-year offerings.
Another word of caution is that the government issues three different kinds of obligations. Some carry fixed interest rates, but others come with floating rates. Plus, you must purchase bonds through a broker who has access to the JSE, Johannesburg Stock Exchange. They are not sold directly by the government to individuals.
Domestic Commodities
Many domestic corporations export commodities. In fact, South Africa is the world’s number-two producer and exporter of gold. The nation’s top export commodities, with few exceptions, are metal-related. Currently, the leading resources exported include palladium, zirconium, platinum, gold, chrome, vanadium, iron ore, and coal. There are two main ways to take part in the potential growth of South Africa’s commodities markets. The first is through direct investment in companies that mine metals for global export. Year after year, many of the most profitable domestic corporations are mining operations.
Even amid weak economic growth prospects for the nation as a whole, the mining industry often outperforms all other sectors. There’s no denying that South Africa’s most valuable national resources are the various metals underneath the ground. Between now and Dec. 31, anything could happen in South Africa’s economy, but it’s helpful to look at the leading indicators, like inflation, unemployment, and GDP growth.
