South Africa Equity Strategy+: Optically cheap, selectively interesting

Research evidence excerpt

South Africa Equity Strategy+: Optically cheap, selectively interesting

Foundation

June 8, 2026 01:00 AM GMT

RMB Morgan Stanley Proprietary Limited+MSouth Africa Equity Strategy+ | EEMEA Christopher Nicholson

Equity Strategist and Analyst

Optically cheap, selectively Christopher.Nicholson@rmbmorganstanley.comAndrea Masia +27 11 587-0816

Economist

Andrea.Masia@rmbmorganstanley.com +27 11 587-0820

interesting

Exhibit 1 : Lower multiple reflect lower

A combination of cyclical and structural factors weigh on growth expected growth

expectations; however, this is largely reflected in discounted

market valuations. We initiate coverage with a selective, stock-

led approach.

South African equities are optically cheap: 1) trading well below long-term

averages at a forward PE of 9.6x and dividend yield of 4.6%, 2) vs a range of global

peers, 3) pricing in an elevated risk premium (comparable with Covid/GFC levels), 4)

relative to real bond yields, and 5) across both Top 40 and mid/small cap stocks.

This starting point has historically been supportive of subsequent returns. Source: Datastream from LSEG, RMB Morgan Stanley Research

Lower growth expectations = lower multiples. Our analysis suggests that lower

Exhibit 2 : Most preferred sectors include

multiples largely reflect weaker earnings growth expectations rather than market

Banks, Technology, Beverages, Diversified

mispricing:

Miners and Telcos. Least preferred sectors

1. Gold and platinum group metals (PGMs) sit at the centre of the debate include PGMs, Paper & Packaging

through their increased weight, earnings contribution and macro relevance.

Low multiples reflect materially elevated margins more than value, with

expectations for earnings growth from here thus naturally lower. Our