Min­ing stocks re­main the favoured flavour

Financial Mail - Investors Monthly - - Con­tents - Maarten Mit­tner

After gain­ing 5.74% in March, the JSE all share in­dex slumped in April, record­ing pal­try growth of 1.35% in the month as in­dus­tri­als took a breather.

Naspers dropped 5.2% in the month and SABMiller was down 3.15%. Richemont shed 2.9%.

Min­ing stocks re­mained the flavour of the month. The re­sources 10 in­dex climbed 12.5%. At end-April the in­dex was up 26.8% over the year as gold and plat­inum prices con­tin­ued to rally.

At month-end the gold price was up an an­nual 21.7% to just un­der US$1,300/fine ounce. It crossed the cru­cial $1,300 level in May but could not hold on as the mar­ket awaited di­rec­tion from the US Fed­eral Re­serve on the fu­ture in­ter­est rate path.

The lo­cal gold in­dex con­tin­ued its shin­ing path, but its 5.4% growth in April was some­what sub­dued after the in­dex rock­eted nearly 50% in Fe­bru­ary. At the mid­dle of May the in­dex was still 110% higher for the year.

The plat­inum price was not far be­hind, climb­ing an an­nual 20.9% to above the $1,000 level in April. The plat­inum in­dex was up 103% in 2016 at the end of April after climb­ing a fur­ther 21% in the month.

Global cur­ren­cies re­mained jit­tery, with un­cer­tainty around whether the Fed will hike rates at four times this year, as pre­vi­ously stated, or only a fur­ther two. Part of this un­cer­tainty was re­flected in US eq­uity mar­kets, with the Dow Jones in­dus­trial av­er­age end­ing April flat (+0.05%).

Global mar­kets were also weaker to mixed amid a lack of clear point­ers on growth. The FTSE 100, the Paris CAC 40 and the Ger­man Dax all re­mained in neg­a­tive ter­ri­tory on an an­nual ba­sis at the month end.

The dol­lar plunge against the yen last month re­flected the re­al­ity that global mar­kets were still hooked on fur­ther stim­u­lus life­lines from cen­tral banks against a back­drop of lower global growth pro­jec­tions.

At end-April the dol­lar had weak­ened 11.8% against the yen after the Bank of Ja­pan re­frained from fur­ther stim­u­lus an­nounce­ments that the mar­ket had ex­pected. The green­back stood rel­a­tively firm against the euro in choppy trade.

The rand sta­bilised in April, but trade re­mained volatile, with the lo­cal cur­rency los­ing 7.7% to the green­back since the be­gin­ning of Jan­uary.

A clear view was that the oil price was over­sold after fall­ing to $29/bbl in Fe­bru­ary. Brent crude rose 18% to $45 in April, but mar­ket play­ers were scep­ti­cal that the price jump could be jus­ti­fied on fun­da­men­tals. That would de­pend on pro­duc­tion cuts in oil-pro­duc­ing coun­tries, which seems un­likely.

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