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Key Point
- RMB Morgan Stanley forecasts strong returns for South African stocks, citing companies like African Rainbow Minerals and Northam Platinum.
- Morgan Stanley anticipates 18% returns from South African stocks, outpacing local bonds’ 13% and cash’s 8% returns.
- Patrice Motsepe’s stake in African Rainbow Minerals boosts his net worth to $3 billion as ARM shares surge over 14% this year.
RMB Morgan Stanley, a unit of U.S. investment bank Morgan Stanley, sees strong potential in South African equities, picking billionaire Patrice Motsepe’s African Rainbow Minerals (ARM) as one among several companies poised to deliver returns exceeding those of cash and bonds.
The bullish outlook comes amid analyst projections of interest rate cuts and reduced rolling blackouts, which are expected to bolster corporate earnings.
Companies like ARM and Northam Platinum are seen as particularly promising, with Morgan Stanley strategist Mary Curtis estimating their stocks could yield 18 percent over the next year. This would outperform the projected returns of 13 percent for local bonds and 8 percent for cash.
Why South African stocks could be the next big thing
“South Africa’s prospects are promising,” Curtis said, citing the potential for these stocks to outperform. Other companies on the list compiled by RMB Morgan Stanley include FirstRand, Discovery, Bidvest Group, Life Healthcare Group, Aspen Pharmacare, Sappi, Prosus, Anheuser-Busch InBev, and Vodacom Group.
The South African Reserve Bank is expected to cut its key rate by 25 basis points at its September meeting, according to Morgan Stanley. Coupled with an anticipated acceleration in economic growth to 1.9% in 2025 and potential policy easing in the U.S., “the stage is set” for a pickup in equities, Curtis noted.
South African stocks are currently trading at a valuation discount, with a price-to-earnings ratio of nearly 11 times compared to the 10-year average of 13. Meanwhile, bond yields have come down but remain elevated compared to historical levels.
Patrice Motsepe’s mining gem: ARM shines bright in 2024
ARM, a prominent South African mining and minerals company, holds interests in various projects spanning iron ore, coal, copper, gold, platinum, and other precious metals. Africa’s first Black billionaire, Patrice Motsepe, owns a 45.9 percent stake in ARM, solidifying his position as one of Africa’s wealthiest individuals.
Following a challenging 2023, ARM shares have been among the best performers this year, with year-to-date gains exceeding 14 percent. A $100,000 investment in ARM at the beginning of 2024 would now be worth approximately $114,500.
South African billionaire makes $400 million in 2024 as ARM stock surges
The gains have been particularly strong in the past six months, with ARM’s share price surging over 20 percent to reach R221.08 ($12.1). This has pushed the company’s market capitalization to R49.75 billion ($2.72 billion).
The impressive share price performance has also boosted the market value of Patrice Motsepe’s stake in ARM. As of this report, his net worth is estimated at $3 billion, largely driven by the increase in ARM’s share price. Motsepe’s wealth has grown by $400 million in 2024 alone, recovering a significant portion of the losses incurred in 2023 when his net worth dropped from $3.2 billion to $2.6 billion.
