South Africa’s stock market is acquiring greater depth and breadth as flourishing sectors such as retail, tourism and financial services attract a new wave of investment, according to members of the Group of Boutique Asset Managers (GBAM).

Hlelo Giyose, Founder and Chief Investment Officer of South Africa’s First Avenue Investment Management, which hosted the latest meeting of GBAM, said previous negative perceptions of the JSE (Johannesburg Securities Exchange) have been associated with the market’s dominant mining stocks and their associated challenges of commodity pricing, managing industrial relations and legislative interference.

However, other sectors are now re-balancing that former dependence, he said: “Retail and financial services are the fastest growing sectors of the economy and mining, coupled with manufacturing, is now the lowest. Even tourism and hospitality is now a higher contributor to GDP than mining.”

GBAM is a global network of independent, specialist asset managers who work together to improve their presence in international markets.

Membership, by invitation only, is comprised of senior executives who collaborate by sharing information and promoting their activities individually and collectively to potential investors.

GBAM members met in Johannesburg to discuss opportunities for nimble, sophisticated investors around the world.

South Africa is proving a new focus of attention as the composition of companies on the JSE has resulted in superior investment returns in US dollar terms.

Since 1960, the JSE has averaged approximately 13% in dollar terms, even after accounting for an annual 5% depreciation of the local Rand currency relative to the dollar.

“Admittedly, while the rate of currency depreciation seems low, it is accompanied by high volatility - as we’ve just witnessed in 2013 and 2014,” Giyose said.

These market returns reflect the preponderance of high fundamental returns and strong cash flow growth in the local economy.

South Africa is just 1.57% of global market capitalisation (consisting of 19 liquid exchanges), yet it has a return on equity of around three percentage points above the global average of a little over 11%.

Giyose said that from a macro perspective, high fundamental returns are considered symptomatic of the dominance of corporate South Africa’s monopoly of new resources typically responsible for economic growth: capital investment, labor, and technology. But they are also testament to the exemplary microeconomics of capital allocation by the managements of South African companies.

“In other words, South African businesses are not wasteful monopolies. High quality companies tend to be very defensive during periods of uncertainty, and also outperform the local bourse a stunning 88% of the time during such spells,” he said.

South Africa has been a top performing stock market (Number 1, 2 or 3) over most time frames in the last 110 years, he added.

“We anticipate this will continue to be the case given how South African businesses like SAB Miller have successfully expanded into the rest of the continent and the world, while generating strong fundamental returns.”

First Avenue of South Africa, a Johannesburg-based asset manager, is the pre-eminent intrinsic value fund manager in the local market.

The firm is set to offer European investors access to South African equities through a new UCITS fund in the second half of 2015.