2019/08/28 00:00:00

Market comments
Global equities rebounded in June as the US-China trade war ebbed and Trump backed off on some of his threats. Global growth data remained negative with further declines in PMIs. Although the 19 June Federal Open Market Committee meeting saw no rate change, it delivered a strong statement, virtually promising a rate cut at the 31 July meeting.
During the second quarter of 2019, the MSCI World Index realised a gross return of just more than 4%, outperforming the MSCI Emerging Markets Index, which managed a very modest return of 0.6% over the same period. Global bond yields continued to rally with US 10-year yields down to 2.01% and trading sub-2% for the first time since late 2016. US 10-year yields are down more than 125 basis points since November 2018.
In the first half of 2019, the MSCI World Index delivered a total return of 17.4%, outperforming Emerging Markets (+10.8%). Within the MSCI World, North America was the best performing region with a return of 18.9%, followed by Europe’s 16.5% and the Pacific region’s 11.3%.
In South Africa weak economic data dominated the post-election headlines with firstquarter GDP falling 3.2% quarter-on-quarter, worse than the -1.6% Bloomberg consensus. The President’s State of the Nation Address promised little more than further Eskom bailouts and progress on spectrum auctions with few details/deadlines.
During the second quarter of 2019, the FTSE/JSE All Share Index (ALSI) posted a total return of 3.9% versus the 8% for the first three months of 2019. SA Financials was the best performer, returning 5.4%, followed by SA Industrials with a total return of 4%. SA Resources only managed a gain of 2.4% in the second quarter after the large 17.8% total return in the previous quarter. The FTSE/JSE All Bond Index (ALBI) returned 3.7% after posting a similar return of 3.8% in the first quarter. SA Property managed to outperform bonds, posting a total return of 4.5%. Among the other important indices the FTSE/JSE Shareholder Weighted All Share Index (SWIX) (+2.86%) performed in line with the FTSE/JSE Capped Shareholder Weighted All Share Index (Capped SWIX) (+2.90%).
In the first half of 2019, SA Equities was the best performing asset class, with the ALSI delivering a total return of 12.2%. SA Bonds gained 7.7%, whilst SA Property was the worst performing asset class with a total return of 6%. Cash posted a total return of 3.6%.
Performance
The FTSE/JSE Top 40 Index was one of the best performing indices for the second quarter of 2019 and had a positive return of 4.61%. The index outperformed the ALSI, which had a return of 3.92% for the quarter and did significantly better than the FTSE/JSE Shareholder Weighted Top 40 Index (SWIX 40), which had a positive performance of 3.09% for the first quarter of 2019.
The difference in return between the two Top 40 indices could be explained by the overweight exposures to especially Richemont (CFR) and Gold Fields (GFI), which both experienced strong performance for the quarter, and the relative underweight position in Sasol (SOL), which had a terrible quarter performance wise, all contributing to the outperformance of the Top 40 Index versus its SWIX 40 counterpart. The relative underweight positions in MTN Group (MTN) and a number of banking stocks like ABSA Group (ABG) and FirstRand (FSR), which all had substantial performance over the quarter, detracted somewhat from the performance.
During the June 2019 FTSE/JSE index review Exxaro (EXX) was added to the index while Netcare (NTC) was deleted from the index. The one-way turnover for the index review was 1.18%.