Blogs

South African Market:

June brought with it a few notable domestic developments prior to the world’s focus on the UK’s astonishing vote to leave the EU. The month started with the much anticipated announcement from S&P which affirmed South Africa’s foreign currency bond rating at one notch above sub-investment grade, or “junk” status. In its statement, S&P warned that low GDP growth and rising political tensions could still see a downgrade in its rating this year (December 2016) or next year “if policy measures do not turn the economy around”. All eyes are on our political and business leaders as they scramble to make the case for not downgrading South Africa. Most of the published analyses implies that this is essentially a fait accompli.

South African Market:

As you were! Local markets reverted to type this month as recent rallies in the Rand and Resource shares turned around, halted by local politics, S&P’s impending credit rating announcement and global economics. Industrial shares and cash were the only sources of positive returns to be found. This month’s political own goal came in the way of a report in the Sunday Times that the Hawks want Finance Minister, Pravin Gordhan to be prosecuted for “espionage”?!

South African Market:

Politics continued to dominate the local news flow in April as ratings agencies and prominent global institutions alike warned that the current political crisis is a major risk to growth. Both the IMF and the World Bank downgraded South Africa’s growth forecasts for 2016 and 2017 respectively. The IMF is now forecasting SA’s economic growth for 2016 at 0.6% from 0.7% and at 1.2% from 1.8% for 2017.

South African Market:

The wonderful thing about the political fireworks that we witnessed in March is that South Africans have been so captivated by the display, that we have had little opportunity to dwell on the Protea’s valiant (but ultimately disappointing) showing in the T20 World Cup! Slowly but surely, our democracy is holding its own and the powers that be are being held accountable for their unlawful and unconstitutional actions, as we have seen in this month’s Court of Appeal (Bashir case) and Constitutional Court (Zuma case) findings.

South African Market:

All good things come to those who wait, and if Leo could finally win an oscar, then there is hope that South Africa could avoid the dreaded downgrade after all.

South African Market:

If returning from a relaxing summer break and heading straight into a global stock market correction wasn’t sufficient to jolt us back into reality, South African’s also had to cope with the indignity of England’s Barmy Army singing about the Rand’s demise at the New Year’s Newlands Cricket Test!

South African Market:

What a month for South African investors! We had three finance ministers in four days, Fitch downgraded SA to a BBB credit rating (the lowest investment-grade rating) and Moody’s changed the outlook on SA’s credit rating to “negative” from “stable”, citing persistent low growth and a growing risk of spending targets being exceeded due to political pressure, as the main reasons behind the move.

South African Market:

Notable themes impacting the South African market in July were the continued weakness of the Rand, as well as the ongoing rout in the resources sector which has lost 40% in the last year. Resources shares are testing the resolve of the value investors who see long term value in the sector, but are suffering underperformance whilst waiting for the sector to turn. Whilst this may well turn out to be a generational investment opportunity, it is another reminder of how difficult it can be to be a contrarian investor. The property sector and bonds returned to winning ways in June, after a few months of negative returns, although we note that bonds have still underperformed cash over the last 12 months.