South African Market Update South African equities benefited from the increase in investor risk appetite, with the local equity market delivering strong performance during the month. The strong performance was mostly broad based and was largely driven by the gold miners and Naspers, however, banks continued to underperform the broader market. Local bonds ended the month marginally lower after a very strong April and May, as the worsening fiscal position of the country was highlighted in the supplementary budget delivered towards the end of the month. Local listed property rebounded strongly in the month, recovering some lost ground despite continued concerns around rental collections and balance sheet risks posed by ever increasing loan to value ratios. The rand was largely stronger against most major currencies during the month, showing signs of stabilising following significant depreciation since the beginning of the year. South African Economic Update Finance Minister Tito Mboweni delivered the supplementary budget towards the end of June, providing an update on the state of the country’s finances along with government’s intentions to reduce debt to a more sustainable level. While the content of the supplementary budget was generally well received, it was rather light on specific details, with many commentators highlighting the fact that implementation risk remains relatively high. The Q1 2020 GDP figure was announced during the month, which showed a 2% decline in growth, deepening the recession in SA following two consecutive quarters of negative growth in the second half of 2019. SA headline CPI fell to a year-on-year figure of 3% to the end of April, its lowest level since June 2005, largely driven by lower fuel and transport prices. In positive news, May’s trade balance came in at a surplus of just under R16 billion, as exports dramatically increased by 96% month-on-month, while imports declined by 2% month-on-month. Chart of the month: The recovery in the US equity market since the end of March 2020 has been largely driven by the performance of Facebook, Amazon, Apple, Microsoft and Google: See below for a summary of the key market movements for the month of June:
• The JSE All Share Index (+7.7%) delivered strong performance during the month, supported by strong returns from large index constituents and resources counters. • All local equity sectors delivered strong returns, however, Resources (+8.8%) fared better than both Industrials (+8.3%) and Financials (+4.2%). • Listed property (+13.4%) had its best month in over a decade, largely driven by strong performance from Redefine (+72%) following the company entering discussions to sell part of its business. • Local bonds (-1.2%) ended the month lower, as yields moved higher (moving prices lower) following the announcement of the precarious fiscal position of SA as highlighted in the supplementary budget. • Cash delivered a stable return of +0.4% for the month. • Most major developed equity markets ended the month higher, as investors reacted positively to announcements of fiscal support from global governments and central banks. The MSCI World Index delivered a return of +2.7% for the month. • Emerging market equities were the major beneficiary of the risk on environment, outperforming developed markets over the month. The MSCI Emerging Markets Index delivered a return of +7.4% for the month. • Most major equity markets ended the month with positive returns, with Germany’s FSE DAX (+7.3%), China’s Shanghai SE Composite (+5.7%), Japan’s Nikkei 225 (+1.9%) and the UK’s FTSE 100 (+1.6%) all ending the month higher. • US equities also ended the month higher, with the technology heavy NASDAQ 100 (+6.4%) and the S&P 500 (+2.0%) both ending the month with positive returns. • In terms of the major commodities, Oil (+16.5%) ended the month higher, however, the price of brent crude is still down -37.7% year-to-date. Gold (+2.3%) ended the month higher, while Platinum (-1.3%) ended the month slightly lower. • The rand was slightly stronger against most major developed market currencies for the month. The rand appreciated against the pound sterling (+1.5%), the US dollar (+1.5%) and the euro (+0.5%) during the month. *All data is sourced from Morningstar Direct as at 30/06/2020. The performance of South African asset classes is quoted in rands and the performance of global asset classes is quoted in US dollars. Source: Morningstar
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