Equities continued to show signs of weakness in the third quarter, undoing the positive momentum of the first half of the year. Global equities returned 7.3% in rand terms for the quarter, driven mostly by the rand losing 7.4% of its value against the US dollar. The sell-off happened in July and August when market participants became more concerned about slowing global trade as a result of the US/China trade war. Central banks tried to soften the blow by engaging in expansionary monetary policies, but their efforts fell short.
SA equities followed the global trend losing 5.1% for the quarter, driven by poor performance from resource and financial companies which lost 6.4% and 6.8% respectively. Sasol lost 27.7% of its value after it announced a second delay in its financial results pending an in-depth investigation into the Lake Charles project. Year-to-date, the company is down 39.1%. Single metal companies such as Northam, Implats, Harmony and Sibanye bucked the trend, rallying between 25% and 40% during the quarter. The fall in financials was largely on the back of poor business confidence in SA, which was at a 34-year low in August. In response, most investors have shied away from domestic equities – concerns of poor economic growth, escalating contingent claims from the state-owned companies as well as a stubbornly high unemployment rate are some of the factors that have contributed to this. The same factors drove returns in the property market, which declined 4.2% for the quarter. The presence of UK property companies in the local bourse also detracted from the market. Brexit remains a major problem for these companies. This was evident in Intu’s 39% plunge for the quarter, despite gaining 12% in September.