All share dou­bles last year’s re­turn

Signs for 2017 look pos­i­tive

The Star Early Edition - - COMPANIES - Sandile Mh­cunu

THE JSE all share in­dex had de­liv­ered dou­ble the en­tire 2016 re­turn in the first three weeks of this year, said Izak Oden­daal, in­vest­ment strate­gist at Old Mu­tual Multi-Man­agers in an in­ter­view with Busi­ness Re­port yes­ter­day.

The first three weeks of last year saw an 8per­cent loss on the JSE, wip­ing out more than 2015’s re­turn as a fall in com­mod­ity prices and the weaker rand neg­a­tively af­fected the mar­kets. How­ever, since this year started the all share had shown pos­i­tive growth but Oden­daal warned in­vestors that the good start to the year did not nec­es­sar­ily trans­late to the mar­kets sus­tain­ing the gains for the rest of the year.

Pos­i­tive signs

“The point is, the mar­kets had a ter­ri­ble start to 2016. This year it has been good but again we warn the in­vestors not to take their in­vest­ment de­ci­sion on the first weeks’ per­for­mance of the year and as­sume it is go­ing to be the trend for the rest of the year,” he said.

How­ever, the signs for the rest of the year look pos­i­tive as com­pared with last year.

“The rand has strength­ened and is look­ing firm and it sailed through the global shocks of last year largely un­scathed. South Africa’s in­vest­ment grade credit rat­ing is safe for the next few months, while we were still reel­ing from ‘nenegate’ a year ago.

“Com­mod­ity prices in­creased through the course of last year, most no­tably iron ore and coal,” he noted.

Oden­daal said this was de­spite the econ­omy grow­ing less than 1per­cent last year.

On the food in­fla­tion front, Oden­daal said South Africa looked set to have a maize sur­plus this year, which sug­gested the food in­fla­tion shock was likely to be be­hind us.

“White maize is trad­ing 40 per­cent lower than a year ago and wheat prices 18 per­cent lower. There­fore, while De­cem­ber’s in­fla­tion num­ber was higher than ex­pected at 6.8 per­cent, it prob­a­bly rep­re­sents the peak in the cy­cle. Food in­fla­tion re­mains stub­bornly high at 12per­cent,” he said.

The real re­tail sales num­bers came out pos­i­tive in Novem­ber and in­creased by 3.8 per­cent year on year de­spite a num­ber of down­beat trad­ing up­dates from lead­ing JSElisted cloth­ing re­tail­ers.

Oden­daal said the im­prove­ment oc­curred even though con­sumer con­fi­dence re­mained low. “What mat­ters more is that the global and lo­cal econ­omy are on a much sounder foot­ing as we kick off the new year, and there­fore mar­ket sen­ti­ment is also more pos­i­tive,” said Oden­daal.

The global mar­kets were look­ing pos­i­tive this year as well and Oden­daal pointed this to a wide va­ri­ety of in­di­ca­tors sug­gest­ing a cycli­cal re­bound in growth started to­wards the end of last year.

“Global pur­chas­ing man­agers’ in­dices have im­proved across the de­vel­oped and emerg­ing world. Con­sumer con­fi­dence is at high lev­els in key mar­kets like the US and the eu­ro­zone. In­fla­tion is also in­creas­ing from wor­ry­ingly low lev­els, which in­di­cates im­proved pric­ing power for com­pa­nies. The In­ter­na­tional Mon­e­tary Fund last week up­graded its growth fore­cast for ad­vanced economies over the next two years. After re­lent­less down­grades over the pre­vi­ous four years, the global growth out­look has sta­bilised at 3.4 per­cent in 2017 and 3.6per­cent for 2018,” he said.

US mar­kets re­sponded pos­i­tively to Don­ald Trump’s elec­tion. “I must stress out that there are lev­els of un­cer­tainty to­wards his elec­tion as pres­i­dent. He promised to cut taxes, spend money on in­fra­struc­ture and he crit­i­cised the Tran­sPa­cific Part­ner­ship trade deal, and the mar­ket re­sponded pos­i­tively at the time. Will he de­liver? We don’t know for sure for now,” he said.

FILE PHOTO: TIMOTHY BERNARD

The first three weeks of 2016 saw an 8per­cent loss on the JSE as mar­kets were neg­a­tively af­fected.

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