Europe and Japan Back in Focus

Why Global Diversification Matters More than Ever for South African Investors

Global markets are entering a new phase. Trade relationships are shifting, policy uncertainty is rising and long-standing economic alliances are evolving. For investors, this changing backdrop is reshaping where growth opportunities and diversification benefits can be found.

In our latest IndexMore webinar, Nico Katzke, Head of Portfolio Solutions at Satrix, captured the moment simply:

“The world is changing fast. New alliances are forming and old ones are being challenged.”

In this environment, relying on a single market or region can increase portfolio risk. Instead, investors are increasingly looking beyond traditional exposures and reconsidering the role that regions such as Europe and Japan can play in building more balanced global portfolios.

We explored these themes and the opportunities they present for South African investors seeking cost-efficient international exposure through ETFs listed on the Johannesburg Stock Exchange (JSE).

Why Diversification Needs a Second Look

Many investors use global equity funds to access offshore markets. Today, major global indices are heavily concentrated in the United States, with US shares making up the majority of exposure. While these companies are multinational in nature, this concentration can leave portfolios tied to one policy environment, one currency and a narrower set of sectors.

As Siyabulela Nomoyi, Quantitative Portfolio Manager at Satrix, noted during the session: “Global doesn’t always mean diversified. The MSCI World is now nearly 70% US.”

Adding targeted regional exposure can help investors spread risk more effectively and access different economic cycles, sectors and return drivers.

Europe’s Structural Reset

Europe has often been seen as a slow-growth region. Yet recent developments suggest a more durable shift may be underway.

According to Annalisa Usardi, Head of Advanced Economy Modelling and Senior Economist at Amundi Investment Institute, global power dynamics are evolving: “Equilibrium is relocating. We’re moving toward a more multilateral world.”

Across the region, governments are increasing fiscal spending and focusing on:

• Infrastructure investment
• Energy independence
• Defence and security
• Stronger domestic supply chains
• Broader global trade partnerships

These efforts are aimed at strengthening Europe’s economic resilience and reducing reliance on external forces. For investors, this creates a more supportive environment for long-term growth.
 

A Stronger Case for European Equities

From an equity perspective, improving fundamentals are also attracting attention. Michael Stewart, Head of Equities Business Strategy at Amundi, highlighted that investors are not simply rotating away from the US. Instead, they are seeing genuine opportunity in Europe: “Europe isn’t just a diversification trade. There are real fundamentals pulling investors in.”

Key drivers include:

• Attractive valuations and higher relative dividends
• Well-capitalised and profitable banks
• Increased defence and infrastructure spending
• Global leaders in industrials, manufacturing and energy

These factors are supporting stronger earnings potential and renewed capital flows into the region.

Japan’s Quiet Transformation

Japan is another developed market experiencing meaningful change. After decades of low growth and deflation, structural reforms are beginning to take effect. Corporate governance improvements, stronger profitability and policy support are helping revitalise the economy.

Japan also plays an important role in advanced manufacturing and automation. As technologies such as robotics and “physical AI” become more integrated into production processes, the country’s industrial strength may provide a competitive advantage. For global investors, this combination of reform, innovation and diversification benefits makes Japan an increasingly relevant allocation within developed markets.

Accessing These Opportunities from South Africa

For South African investors, accessing offshore markets has historically involved higher costs or operational complexity. ETFs listed on the JSE provide a simpler solution. They offer:

• Rand-denominated trading
• Cost efficiency
• Liquidity
• Transparent index exposure
• Easy integration into existing portfolios
  

To help investors access these regions more effectively, Satrix has introduced two new ETFs:

• The Satrix Stoxx Europe 600 ETF
• The Satrix MSCI Japan ETF

These funds provide broad exposure to European and Japanese equities respectively, enabling investors to complement core global allocations with targeted regional diversification.
 

Building More Balanced Global Portfolios

As the global landscape evolves, portfolio construction needs to evolve with it. Europe and Japan offer exposure to different industries, policy environments and growth drivers than the US-dominated global benchmarks. Including these regions can help reduce concentration risk and improve diversification across developed markets.

For investors seeking long-term resilience, combining core global exposure with targeted regional building blocks may offer a more balanced approach.

To explore these themes in more detail, watch the full IndexMore webinar here.
This event is CPD-accredited. If you want to quality for CPD points watch the full webinar here.

Disclaimer:
Satrix Investments (Pty) Ltd is an approved FSP in terms of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision. Satrix Managers (RF) (Pty) Ltd (Satrix) is a registered and approved Manager in Collective Investment Schemes in Securities and an authorised financial services provider in terms of the FAIS. While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSPs, their shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaim all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information.