The year started with a largely risk off tone, as concerns around the Coronavirus and its impact on global economic growth drove investors out of equitie and into perceived safe havens including gold and developed market government bonds. US equities bucked the global trend slightly, with the NASDAQ delivering decent performance, largely due to strong performance from Amazon on the back of a better than expected earnings announcement. The UK finally left the EU on 31 January after years of uncertainty, entering an 11-month period during which it will need to renegotiate new trade agreements with its biggest partners in Europe. South African equities got off to a difficult start to the year, delivering poor performance in lin e with the risk off tone in major equity markets. Local bonds were the best performing local asset class for the month, supported by the largely unexpected interest rate cut by the South African Reserve Bank (SARB) in January. Local listed property continued to struggle, despite the attractive initial yields on offer as the sector continues to be plagued by lower lease escalations and high vacancies. The rand was significantly weaker against most major currencies during the month, which provided support to some of the locally listed rand hedge counters that generate significant earnings in foreign markets. The SARB cut the repo rate in its January meeting from 6.50% to 6.25%, with the Monetary Policy Committee (MPC) citing lower future inflation and growth forecasts. After three consecutive month on month declines, consumer price inflation (CPI) picked up to a year on year figure of 4.0% to the end of December 2019. The JSE All Share Index (-1.7%) finished the month l ower, as disappointing performance from local retail and bank shares weighed on the performance of the index. The weak rand propped up the performance of the Industrials (+1.6%) index, while Resources (-3.5%) and Financials (-5.2%) fared slightly worse. The top performing shares in January amongst the largest 60 companies on the JSE were Reinet Investments (+16.3%), Quilter (+13.5%) and British American Tobacco (+10.9%). The worst performing shares in January were Sasol (-21.2%), Kumba Iron Ore (-16.2%) and AVI (-13.0%). Listed property (-3.1%) had another disappointing month, weighed down by poor local consumer and business sentiment and oversupply in major office and retail areas. Local bonds(+1.2%) delivered decent performance, supported by the attractive yields on offer as well as the interest rate cut announced by the SARB during the month. Cash delivered a stable return of +0.6% for the month. The rand was weaker against most major currencies during the month. The rand depreciated against the US Dollar (-6.8%) the euro (-5.6%) during the month. *All data is sourced from Morningstar Direct as at 31/01/2020. The performance of South African asset classes is quoted in rands. Source: Morningstar
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