“Consumers can drink nearly three cappuccinos in South Africa for the price of one in the US and could spend four nights in a Cape Town hotel for the price of only one in London,” said Mary Curtis, a strategist at the broker, and Andrea Masia, an economist.
“Looking at the bigger picture, low relative prices of South African goods and services are just another example of value in South Africa assets,” they wrote in a note to clients.
Valuations for both bonds and equities look cheap compared with peers, with elections due later in the year potentially providing a fresh catalyst to unlock some value, they said.
Meanwhile, price disparities support the continued recovery in South Africa’s net tourist receipts, while the weaker currency should result in lower import growth, they said. Both would help offset the slide in export prices and limit the potential deterioration in the current account.