JPMorgan likes MTN, but not Clicks and Discovery

It may be time to drop gold and tech stocks and buy country-focused South African stocks, according to JPMorgan Chase & Co.

The broker upgraded its view on South African equities to overweight from underweight this week, saying that global trade value driven by faster economic growth, stronger commodity prices, a weaker dollar and less trade tensions with management incoming US and cyclical stocks, at the expense of gold and tech companies.

“We see more room” for JPMorgan’s South African basket shares to outperform an offshore basket, strategist David Aserkoff wrote in a note dated November 23. While the first group has increased by 14% in US dollar terms and has surpassed the second by 19%. in the past three months, domestics are still down 18% so far this year, he said.

According to Aserkoff, locally focused actions will also receive a boost from an increasingly positive news flow as the country’s reform process progresses. Financial, general retail and industrial companies, which have fallen in 2020, are expected to continue to appreciate in 2021, he said.

More from the report:

• JPMorgan favors Sibanye Stillwater Ltd., which it considers undervalued relative to spot prices for platinum group metals (PGM). China’s commitment to decarbonization should boost demand for PGM.
• Anglo American Plc and Impala Platinum Holdings Ltd. also prefer.
• MTN Group Ltd. offers a nice edge, with asset sales and revenue acceleration, says the broker.
• Standard Bank Group Ltd, Sanlam Ltd. and Capitec Bank Holdings Ltd. are correlated with the global value rally.
• Foschini Group Ltd., Pepkor Holdings Ltd. preferred among retailers.
• Bid Corp Ltd. and Pick n Pay Stores Ltd. are favorites among food and drug retailers.
• Clicks Group Ltd. and Discovery Ltd. are the least preferred in South Africa.

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