Morningstar shuns low-growth South Africa, favours Brazil, Mexico

Morningstar is steering clear of South African stocks in its global portfolios as relatively weak economic growth overshadows cheap valuations.

That contrasts with the $375 billion asset manager’s overweight stance on emerging-markets, with Brazil and Mexico its top picks outside of of Asia, said Sean Neethling, the firm’s South African investment head.

The FTSE/JSE All Share Index has declined more than 4% in dollar terms this year and is poised for its first annual drop since 2022.

That compares with a 21% rally for the MSCI emerging-markets equity gauge, which has been propelled mostly by gains for Asian artificial intelligence-related firms.

Johannesburg has missed out on global fund flows due to lacklustre economic growth and its dearth of exposure to the AI boom, according to Neethling, who oversees about R60 billion ($3.7 billion) in rand- and dollar-based portfolios.

“If you look at South Africa at a company-specific level, there’s not