The good news amidst all the bad

Most peo­ple will not look back on 2016 with fond­ness, but it hasn't been all bad.

Finweek English Edition - - FUNDFOCUS - Leon Kok is an in­de­pen­dent writer on pub­lic pol­icy and in­vest­ment mar­kets.


pop­u­lar view of 2016 in South Africa, no doubt, is that it’s a year that one would rather for­get given the wide­spread crim­i­nal­ity at the high­est pub­lic lev­els, the less than pedes­trian per­for­mance of do­mes­tic and in­ter­na­tional economies, the seem­ingly rel­a­tively flat JSE in rand terms, and even – if you like – the com­bined dis­mal de­feats of rugby’s green-and-gold and Bafana Bafana.

But has it been all that bad in its en­tirety? No, not at all.

Fo­cus­ing on the in­vest­ment arena alone, there have been some ma­jor bonuses in be­tween tough and try­ing cir­cum­stances. These in­clude 3.3% growth in SA GDP in the third quar­ter; rea­son­ably con­ser­va­tive fis­cal and mone­tary man­age­ment; a strength­ened cur­rency; and a flat All Share In­dex this year.

Against this, the US S&P was up 8.3% by late Novem­ber; the Global Dow +5.6%; The Ja­pan (Topix) +4.67%; the Stoxx Europe 600 -6.4%; and the Shang­hai Com­pos­ite -7.8%. Among the best per­form­ers were the São Paulo Bovespa, which in­creased 42%, and among the worst, Italy’s FTSE MIB with -22.9%.

Of course, sev­eral phe­nom­e­nal do­mes­tic stock out­per­for­mances this year have in­cluded Har­mony Gold (+263%), Kumba Iron Ore (+258%), As­sore (+256%) and even An­glo Amer­i­can (+148%).

Among re­source funds the Old Mu­tual Gold Fund shot the lights out with a 47% per­for­mance, while the Old Mu­tual Min­ing & Re­sources Fund gen­er­ated 20%.

Old Mu­tual’s Tracy Brodziak re­flects on the fi­nan­cial ser­vices sec­tor in this edi­tion. In that space most play­ers came up short, but still look good over three years. Ned­bank Fi­nan­cial Fund boasts 50% cap­i­tal ap­pre­ci­a­tion over three years, fol­lowed by Old Mu­tual Fi­nan­cial Ser­vices with 31%.

In­dus­trial and listed prop­erty funds were also muted this year.

Look­ing to 2017, al­most ev­ery­thing seems pinned on what Don­ald Trump is likely to do. The Econ­o­mist makes no bones that it be­lieves that he’ll be a dis­as­ter. The Wall Street Jour­nal re­ports that 370 prom­i­nent econ­o­mists have signed a let­ter warn­ing that he is a dan­ger­ous and de­struc­tive choice for Amer­ica.

The big­gest con­cern for emerg­ing mar­kets is that their cur­ren­cies seem set to weaken against the dol­lar, driv­ing in­fla­tion higher; and that rene­go­ti­a­tion of the world trade regime will be un­der­pinned with greater pro­tec­tion­ism, neg­a­tively af­fect­ing ex­porters to the US. The MSCI Emerg­ing Mar­ket In­dex has de­clined sig­nif­i­cantly since Trump’s elec­tion.

The flip side is that the re­con­struc­tion of US in­fra­struc­ture may have a favourable im­pact on emerg­ing mar­kets, thus lift­ing de­mand for com­modi­ties such as steel and cop­per.

De­spite wide­spread reservations, US stock funds have at­tracted record in­flows dur­ing the past three weeks, un­der­lin­ing a re­newed ap­petite for eq­ui­ties at the end of a year dom­i­nated by bonds. This has flowed pri­mar­ily from Trump’s pledge to stim­u­late the US economy through tax cuts, in­fra­struc­ture spend­ing and dereg­u­la­tion of mar­kets.

May this up­ward mo­men­tum con­tinue to el­e­vate and in­spire SA.

I wish to take this op­por­tu­nity to thank all FundFocus’s spon­sors, read­ers and other pa­trons for their sup­port this year; ex­press my ap­pre­ci­a­tion to fin­week ed­i­tor Jana Marais and her team for their su­perb help; and wish you a splen­did fes­tive sea­son and an in­fin­itely more pros­per­ous and joy­ful 2017.

The flip side is that the re­con­struc­tion of US in­fra­struc­ture may have a favourable im­pact on emerg­ing mar­kets, thus lift­ing de­mand for com­modi­ties such as steel and cop­per.

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