EM: South Africa leads structural story – HSBC

HSBC Asset Management argues several emerging markets are entering a structurally bullish phase, highlighting South Africa’s improving fiscal stance and policy credibility. The budget projects rising primary surpluses and a peak in the debt-to-GDP ratio, while higher commodities and high real yields support confidence. With the MSCI South Africa up sharply in USD terms, reforms and external tailwinds are seen enhancing EM’s long-term appeal.

Reforms, yields and commodities bolster appeal

"Several emerging market economies are moving into what looks like a sustained, structurally bullish phase – and South Africa is a case in point."

"Last week’s budget reaffirmed a commitment to balancing the books, with primary surpluses projected to rise in the coming years and the debt-to-GDP ratio set to peak for the first time in 17 years before declining. Stronger-than-expected revenues mean tax hikes are off the table, and long-term bond issuance is also being cut."

"Even the IMF has noted the country’s improving policy credibility, progress on reforms, and macro stability."

"For South Africa, there have been other tailwinds. Higher commodity prices have boosted terms of trade, while high real yields and central bank commitments to a lower inflation target, have anchored confidence."

"Meanwhile, like other emerging markets, South Africa’s stock market has been on a strong run over the past 12 months – with the MSCI SA up 80% in USD terms. In that context, the country’s trajectory highlights how reform, credible policy, and external tailwinds are combining to turn emerging markets into an increasingly appealing structural story for investors."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)