It’s been a largely positive week for financials here in SA, mainly due to the cabinet announcement and the July petrol price cut.

So we’re unpacking SA Inc.’s rally and long-term outlooks before diving into some other important stock updates for you.

Shining some light on 🔦 

• Positive outlook: SA Inc’s GNU cabinet rally. 

• Amazon VS Temu, blockchain’s VC surge & alt AI investments.

• Stock update: Higgo’s Top 10 stock picks for 2024.

• Wealth hackers: How much emergency funds you need.

• The results: Your most exciting emerging markets.

SA Inc's GNU Cabinet Announcement Rally

South Africa's financial markets have seen a significant boost following the announcement of the new Government of National Unity (GNU) cabinet. 

This positive sentiment is a welcome change for investors, marking a potential turning point for the country's economic prospects.

We look at how the markets reacted to the GNU cabinet announcement and why, unpack things that could reverse the positive trend and highlight some SA Inc. stocks and industries to consider.

How the Markets Reacted

1. Stock Market Rally: The Johannesburg Stock Exchange (JSE)’s financials index saw a substantial increase, gaining 2% since May’s election to now sit 4% up year to date with key stocks gaining over 10% and positive overall market sentiment. 

2. Strengthening of the Rand: The South African Rand strengthened to below R18 to the US dollar for the first time since August 2023, reflecting increased investor confidence.​

3. Bond Market Reaction: There was also a positive response in the bond market, with bond yields declining due to strong demand for local bonds, indicating increased investor confidence.

4. Business Sentiment: The business community has expressed optimism regarding the potential for more responsive and business-friendly policies under the new cabinet.

Key Factors Driving The Sentiment

• Political Stability: The coalition between major political parties, including the ANC and DA, fosters a sense of stability and predictability.

• Economic Reform Prospects: Investors are optimistic about potential economic reforms under the new administration.

• Global Economic Conditions: The absence of major global economic disruptions has allowed local markets to respond favourably to internal political developments​ in SA.

Could The Trend Reverse?

Despite the positive response, there are risks that could reverse these trends:

• Political Instability: Any internal conflicts or public dissent within the GNU could unsettle the markets.

• Policy Uncertainty: The effectiveness of the new cabinet in implementing economic reforms is crucial – delays or contentious appointments could dampen investor confidence and lead to market volatility.

• Global Economic Shocks: Adverse global economic developments, such as geopolitical conflicts or shifts in major economies' monetary policies, could negatively impact South African markets​.

Investing in SA Inc.

Two weeks ago, we highlighted potential investment strategies for a rally in SA Inc. looking mainly at retail (historically a strong performer and banking):

• Shoprite: Despite being priced higher than its peers, Shoprite stands out as a strong long-term investment. Its innovative and effective management team positions it well for sustained growth.

• Woolworths: Trading at an attractive valuation with a PE ratio of around 13 and a dividend yield of over 5%, Woolworths is a good bet for those confident in a South African economic recovery.

• JSE Financial 15: An improved economy will likely boost the performance of banks, making JSE Financial 15 a solid investment option.

Note: This is not financial advice, merely observations. For personalised financial advice, you can book to speak to a financial advisor here (powered by a registered FSP: No. 51310).

STOCKS AND ALL

🤖 AI Investment Alternatives: While AMD has been a popular choice for AI investment, two other AI stocks are poised to outperform in 2024. These alternatives are gaining traction due to their innovative technologies and strong market positions.

🛍️ Amazon vs. Shein and Temu: As Amazon eyes the budget fashion market, it faces fierce competition from fast-growing rivals Shein and Temu. These companies are redefining e-commerce with their low prices and rapid product turnover. Can Amazon compete?

🇨🇳 China Stocks to Watch: Recent market dips have created buying opportunities for savvy investors. Three Chinese stocks, in particular, stand out for their strong fundamentals and growth prospects.

💶 Cash Usage Declines in Germany: Germany is experiencing a sharp decline in cash usage as digital payment methods become more prevalent. This shift reflects broader global trends towards cashless economies.

🔗 Blockchain VC Surge: Venture capital investment in blockchain startups is surging, driving innovation and growth in the sector. This trend highlights the increasing confidence in blockchain technology's potential to transform industries.

🚗 Volkswagen Invests in Rivian: Volkswagen has made a strategic investment in Rivian, the electric vehicle startup. This partnership aims to accelerate the development of EV technologies and expand market presence.

💎 Arnault's Richemont Stake: Bernard Arnault, the head of luxury conglomerate LVMH, has reportedly purchased a stake in Richemont, the owner of Cartier, which has also announced a new CEO. All moves which could signal a significant shift in the luxury market landscape.

🌞 First Solar's Stock Drop: First Solar's stock price recently fell by 6.4%, reflecting market reactions to industry and company-specific challenges, as well as broader fluctuations in the renewable energy sector.

🚗 Tesla's Sales Struggles: Tesla is facing ongoing challenges in maintaining its sales momentum, despite its reputation for innovation.

Build Wealth Faster

Building wealth is about more than just investing.

There are many factors to consider beyond just knowing which stocks to buy.

Research shows time and again that people who have a financial advisor tend to:

• accumulate 39% more liquid financial assets 

• 21% more pension wealth in two years than those who don’t have an advisor.

Families who have a trusted advisor accumulate over 290% more assets over 15 years than those who try to invest on their own.

Why? Because building wealth requires a tailor-made approach, based on your finances and situation.

If you want to build more wealth, faster, get your own financial advisor right now.

(Powered by a registered FSP: No. 51310).

WEALTH HACKER’S KIT

How (and How Much) to Put in an Emergency Fund

Let’s be honest, there will be bumps in the road on your journey towards financial independence – unexpected medical bills or a crisis that requires a savings fall-back.

Building up an emergency fund is not just about preparing for the unexpected—it's about securing your future and ensuring peace of mind.

Here’s how and how much you need to save up for emergencies…

Why It’s Important

Imagine this: You’ve just landed a fantastic job, when suddenly, an unexpected medical emergency strikes, or your car breaks down, and you're faced with a hefty bill. 

Without an emergency fund, you might be forced to rely on high-interest loans or credit cards, putting your financial stability at risk.

An emergency fund is your financial safety net, designed to cover unexpected expenses without derailing your financial progress.

How Much Should You Save?

The general rule of thumb is to save enough to cover three to 6 months’ worth of living expenses. 

This means covering essentials like housing, utilities, groceries and transportation. 

To determine your exact amount, start by calculating your monthly expenses. Multiply this figure by three to six, based on your personal circumstances. 

If you have a more stable job or other safety nets, three months might be sufficient. But if your income is variable or you have dependents, aiming for 6 months is advisable.

Steps to Building an Emergency Fund

1. Create a Budget: Review your monthly income and expenses to identify areas where you can cut back. Redirect these savings into your emergency fund.

2. Automate Your Savings: Set up an automatic transfer from your checking account to your savings account each month. Treat this transfer like a non-negotiable bill.

3. Find Extra Money: Look for opportunities to earn extra income, such as freelance work or selling unused items. Use this additional money to boost your savings.

4. Stay Disciplined: Resist the temptation to dip into your emergency fund for non-emergencies. Keep the fund strictly for genuine unexpected expenses.

Where to Keep Your Emergency Fund

The thing with emergency funds is they should always be accessible, but separate from your everyday spending money. 

Ideally, you don’t want to keep this fund in accounts that aren’t easily accessible or involve market risks, such as investment accounts.

Here are a few ideas of places to keep it:

• Savings Accounts: A traditional savings account at your bank is a good option. It offers easy access and earns a modest interest rate.

• Money Market Accounts: These accounts typically offer higher interest rates than regular savings accounts while still providing easy access.

• High-Yield Savings Accounts: Online banks often offer higher interest rates compared to traditional banks. Ensure the account allows quick and easy withdrawals.

Building an emergency fund is one of the most important steps you can take towards financial security. It protects you from unexpected expenses and helps you maintain your financial progress during tough times.

THE PEOPLE HAVE SPOKEN

We asked which emerging market region excited you the most, and India won the day…

🟨🟨🟨🟨⬜️⬜️ 🏯 Asia: "Tech and manufacturing dominance." (31%)

🟨🟨🟨⬜️⬜️⬜️ 🦁 Africa: "Rising startups and resource wealth." (22%)

🟩🟩🟩🟩🟩🟩 📱India: "Digital transformation and rapid growth." (39%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🕌 Middle East: "Futuristic projects and sustainability." (4%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🌱 South America: "Vibrant markets and diverse resources." (4%)

To be fair, though, we probably influenced that opinion by showcasing India and China so prominently in last week’s newsletter.

THE UPDATE

Excited for gold? Us too.

Big updates coming next week on Wednesday — don’t miss it!