Kruger Ci Balanced comment - Sep 19
International: Equity markets around the globe had a tough August against a backdrop of economic and socio-political news flow, which reflected slowing global trade, as well as uncertainty with regards to political policy. According to Tantalum Capital, the G7-summit provided few noteworthy developments, other than a chance for President Trump to further his “America First” agenda. The US-China “eye for an eye” trade conflict did not do investors (other than those holding US Treasuries and gold) any favours. Despite some attempts by the Trump administration to allude that a deal is still possible, the latest tariff announcements from the US, followed by retaliation by their Chinese counterparts, represent a significant escalation in the trade war. The very nature of the uncertainty around how tensions may further escalate is becoming a great concern for economists, heightening risks of a reduction of investment due to a drop in business confidence. As if this is not enough to upset the global equity apple cart, Prime Minister Boris Johnson announced the suspension of the British Parliament, from the second week in September to the middle of October, in a move which critics argued is an attempt to hinder members of parliament to block a no-deal Brexit. Against this background markets retreated in August amid higher levels of volatility – the MSCI All Country -3.19% (+ 12.67%ytd); the Dow Jones -1.32% (+15.14%ytd); the S&P 500 -1.58% (+18.34%ytd) and the MSCI Emerging Markets Index which declined by -5.36% (+0.5%ytd) – all in US dollars.
Local: South African markets struggled, not only against a gloomy global outlook, but also against weak local economic data, Moody’s rating concerns, a delay in the restructuring of Eskom and political discontent – particularly about the possible implementation of prescribed assets for pension funds and developments around the latest National Health Insurance (NHI) proposals. Towards the end of the month, there was a silver lining though as Finance Minister Tito Mboweni published an economic strategy for South Africa. It is a comprehensive, detailed strategy and generally pragmatic. Most of the ideas have featured in policy proposals before, though some of the proposed (micro) interventions are fresh. Most importantly, this brings together the entire range of policy proposals and creates a sense of policy coordination and a holistic view of the required interventions (mostly from government, but in many areas it acknowledges that private sector contributions are not only required, but extremely helpful). The immediate response of financial markets illustrated that it was viewed in a positive light. The SA equity market declined in line with global EM markets in August – the FTSE/ JSE All Share index fell by -2.44% (+6.88%ytd). The entire fund range was up for the month, the International Flexible Feeder Fund (previously named Global FOF) by +5.00% (+17.11%ytd); Prudential Fund by +1.09% (+7.84%ytd); Equity by +0.22% (+7.92%ytd); Balanced FOF by + 0.27% (+6.83%ytd); Prudential FOF by +1.35% (+8.06%ytd) and the new Balanced Fund by +0.62% (+7.99%ytd).