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Looking back at Q1 2021: returns up 12%

‘I think if you’ve had an underweight exposure to SA equities, you might want to rethink that’ – Nesan Nair, Sasfin Securities.

SIMON BROWN: I’m chatting now with Nesan Nair, portfolio manager at Sasfin Securities. Nesan, good morning. I appreciate your early morning time. The first quarter for 2021 is done and dusted, and the returns aren’t bad. In the JSE Top 40 we actually were better in earlier March. But [regarding it being up 12% in the first quarter], I don’t know about you, but in the olden days I would have taken 12% in a year. My sense is, can we just shut up and come back in January, sort of sense?

NESAN NAIR: Simon, I think investors have got nothing to complain about – certainly as far as returns are concerned so far this year. There was a concern around about February, if you can remember when the market [went through] a little bit of a jitter, because in the last few years, the last four years actually, we had a very strong start to the year and then a sudden almost correction. But a pullback, a significant pullback. And there was a concern that we were going to see a repeat of that.

This was around the time that the first US stimulus was announced under Biden. Then there were talks that there wasn’t going to be any follow up. But of course, we know that there’s definitely going to be follow up. In fact, I’m sure his presidency is going to be characterised by a fair amount of fiscal stimulus, as we’ve seen this year, which I think is going to be very supportive for global markets, including the JSE. 

If you delve down into those terms compared to last year – sure, last year we had the resources and Naspers to thank for that excellent recovery –

…but in the first quarter this year, it’s actually been a recovery on some of the SA Inc shares. It’s been the banks that have recovered a little from very low levels. Some of the property companies, retailers we spoke about as well, have all produced results that I think have warranted a slight recovery in the share price. More than slight, actually. 

And of course, you mentioned PPC earlier on: is that not an indication of the health of our economy? And a lot of people I’m talking to say SA equities are poised for a rally this year. Six months ago, if you had said that to me, I would have probably scoffed at it. But now I think it would warrant some serious thought. 

SIMON BROWN: We are well ahead of the US. The Nasdaq was up 1.6% for that Q1, S&P 500 up 5.5%. So firstly we’ve got the S&P outperforming the Nasdaq, which hasn’t happened in a while, and locally we are outperforming both. Back to your point, it looks like little SA Inc might finally have its day in the sun.

NESAN NAIR: Yes. And another barometer is obviously the rand as well.

The rand is looking a lot stronger than it has been for the last several quarters.

I’m of the view that maybe this negative sentiment that’s permeated our market for a long time is probably at the beginning of its end if I can put it that way. I think if you’ve had an underweight exposure to SA equities, you might want to rethink that.

SIMON BROWN: Yes. The rand over the same first quarter was weaker by 0.32%, which in the rand is frankly a rounding error. 

We’ll leave that there. Nesan Nair,  portfolio manager at Sasfin Securities, I appreciate your early morning. 

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