High GDP growth but disappointing Bourse performance

Monday, 25 November 2013 00:00 - - {{hitsCtrl.values.hits}}

By First Capital Equities Despite reporting 7.7% GDP growth during 3Q2013, the Bourse has declined by 5.2% during the past three months and remains unchanged at 0.0% on an YTD basis (dollarised).

The dichotomy has resulted in a decline in valuations for not just the ASPI but several ‘triple play stocks’. However, companies with sustainable top line growth, firm earnings momentum and healthy market liquidity, being our criteria for triple plays may well re-rate to higher multiples in 2014. Potential of reversing relative underperformance: As we move deeper into the fourth quarter, valuations should continue to decline for such companies thereby justifying our 2014 optimism for equities. Despite the ASPI’s relative fall from grace, as one of the world’s lowest Market Cap to GDP of approximately 30%, this leaves considerable scope for market upside and in our view, the bourse is poised for a much needed re-rating in 2014 with triple play stocks driving market momentum.