Funds tackle diverging JSE results
• Weak rand benefits hedge stocks, but banking suffers
Local investor unit trust funds seem well prepared to tackle a split asset allocation on the JSE, but a lack of exposure to resources, platinum and gold stocks may diminish future returns.
Local investor unit trust funds seem well prepared to address a split asset allocation on the JSE, but a lack of exposure to resources, platinum and gold stocks may diminish future returns.
“The market continues to deliver a diverging performance, with financials and banking counters lagging as the weaker rand undermines support for both sectors,” analysts at Momentum SP Reid said.
Retailers are experiencing similar headwinds, with the sector shedding 2.77% on Monday, but recovering 1.35% on Tuesday. At the same time, resources and hedge stocks on the JSE have gained on the weaker rand after the downgrade announcements from S&P Global Ratings and Fitch.
The JSE 10 resources index is up 8.2% in 2017, with platinums gaining 23%. The gold index has jumped 19%.
Among individual shares, Anglo American is up 7.6% in 2017 after gaining 180% in 2016. Sasol has gained 2.8% in 2017.
Anglo American Platinum has surged 40%.
Gold producer AngloGold Ashanti is up 14.6%.
The banking index has lost 10.3% and financials have dropped 3.3% in 2017. General retailers have shed 2.8%.
Standard Bank is down 8.9% and Woolworths has lost 3.7%.
“Interest rate-sensitive shares have predictably fallen,” says Old Mutual Multi-Managers analyst Izak Odendaal.
“Banks in particular were hard hit, as S&P also downgraded local banks to bring their ratings in line with the government’s ratings.”
General equity unit trust funds, which are actively managed, have been loath to enter the mining sector, with exposure mostly limited to Sasol, which now forms part of the industrial index. But most of these funds are well exposed to rand hedges.
Rand hedge shares took a tumble in the first quarter, but have since recovered. British American Tobacco is up an annual 19.5% in 2017 and Naspers has gained 21.6%.
Old Mutual Investment group’s flagship Investor Fund has a 16% exposure to Naspers and 4.2% to Sasol. It has a 3.6% stake in BHP Billiton, whose shares are up 3.6% in 2017.
At the end of March quarter Allan Gray Equity had 8.2% in Sasol, clearly taking a bet on a weaker rand and a recovering oil price to boost returns. But it also holds 7.1% in Naspers.
Sanlam General Equity Fund has a bias towards rand hedges, with 12.6% in Naspers and 6.17% in British American Tobacco.
Investec Value Fund is a good example of the benefits of investing in miners, with the fund up an annual 25% at end-February. It has 10.7% in Impala Platinum and 10.1% in ArcelorMittal.
Equity funds are wary of taking on the risks for which Investec Value Fund has become renowned. This fund was the worst performer in 2015 on the commodity rout.