Markets are not pricing in the probability of South Africa’s return to investment grade, leaving scope for government bonds, stocks and the rand to rally, according to Goldman Sachs Group Inc.

The country could regain its investment status as soon as 2028 as ratings companies reward its improving finances and economic growth, a Goldman team including economist Andrew Matheny wrote in a note.

“Our baseline is that South Africa regains its first IG rating in 2028, albeit with two-sided risks to timing,” Matheny said. “Markets at this stage in our assessment largely do not price this in.”

Goldman’s analysis suggests scope for the government 10-year local-currency yield to fall more than 100 basis points to 7.6%, and the sovereign spread, or yield premium of dollar bonds over US treasuries, to outperform investment-grade emerging markets. Five-year credit-default swaps, at around 116 basis points on Tuesday, may fall to about 100 basis points, the analysts wrote.

“Given the larger rally in fixed income relative to equities observed to date, we see comparatively more structural upside to the latter over time if macroeconomic improvements continue,” the team wrote. They also see about 9% upside for the rand versus the dollar based their fair-value estimate, but “realising this upside depends in part on the broader dollar,” they wrote.

Africa’s largest economy was cut to junk in 2017 as growth slowed and public debt soared. But improvements in the fiscal picture, growth and the policy backdrop will likely result in credit upgrades over the next year, the analysts wrote.

S&P Global Ratings and Moody’s Ratings assess South Africa at BB and Baa2, respectively, or two levels below investment grade. Both have a positive outlook on the debt, suggesting an upgrade is likely.