NOT ALL AWFUL, AS LONG AS YOU’RE NOT MINING
t was another torrid month for mining stocks up to the middle of August. Former market stalwart Anglo American lost another monthly 4,88% and is down 30% so far in 2015.
The JSE’s Resi 10 index has dropped a more moderate 1,67% in August, but is still 16% down year-to-date. This has had a negative effect on the all share index, which is down 2,85% in the month and struggling to remain positive for the year, gaining only 1,61% so far in 2015.
Among the mining losers, Lonmin is ahead of the pack, having lost more than 70%. Iron ore producer Kumba has shed 60%.
Then there are the winners. Retailer Christo Wiese’s prowess as deal-maker was again proven by the Steinhoff buyout of Pepkor from Brait. Wiese remains a sizeable shareholder in Brait.
Some portfolio managers have said they were caught flat-footed by Wiese’s moves. Shareholders are smiling, though, as Steinhoff has gained 30% this year and Brait 77% in the Virgin Active and New Look London deals.
The trick with Wiese is to invest in his companies before they take off. The hot punt now is Stellar Capital Partners, already 23% up to mid-August, but still offering potential value.
The rand continues to be buffeted by the stronger dollar and China’s devaluation of the yuan, losing 10,16% against the greenback year-to-date. An improvement is not predicted for the near future, and the rand is expected to cross R13/$ over the short term.
A stronger dollar in anticipation of US interest rate hikes, and a weaker euro, remain the trend in foreign exchange markets. Markets were surprised by the yuan’s devaluation. It seems that predictions of China becoming a consumer society have been overstressed, and the devaluation indicates that a rebound in the manufacturing sector in China remains a priority.
Global equity markets look decidedly wobbly at present. The Dow Jones is in negative territory on an annual basis. It is down 1,62% to mid-August and 2,36% year-to-date. The performance of the FTSE 100 is also flat. But there are bright spots. Shanghai has lifted 19% year-to-date despite the volatility and the Nikkei has added 17,7%, again proving that equity markets like stimulus measures of whatever form.
Markets could potentially get further support from the lower Brent crude price, which has again dipped below the level of $50/barrel. The price is down 13% so far in 2015.