Bourse is set for a poor quarter
• Analyst blames the strong rand and lack of confidence after scandals
With one trading day left, the JSE all share is heading for its worst quarterly performance in nearly eight years as it reels from the effects of a strong rand and global riskoff trade.
With one trading day left, the JSE all share is heading for its worst quarterly performance in nearly eight years as it reels from the effects of a strong rand and global risk-off trade.
The all share was down 7.97% for the quarter on Wednesday, having closed higher only once in the past 11 days. The last time it fell by a similar amount was in June 2010, when it lost 8.66%.
“The South African market is definitely unique compared to other global markets, heading in the opposite direction when most equity markets are in upbeat territory,” said Capicraft Investment Partners analyst Drikus Combrinck.
Combrinck said the strong rand was largely to blame for this. “But there is also a general lack of confidence following a number of recent corporate scandals,” he said.
Local fund managers have positioned portfolios heavily towards rand hedges and foreign assets, benefiting from a weaker local currency.
The surprise turnaround in the rand and the improving political environment has seemingly caught them off guard.
A study — known as the Spiva Scorecard — released by S&P Dow Jones Indices on Wednesday found that over a one-year period, 74% of actively managed South African equity funds and 67% global equity funds failed to beat the S&P SA DSW capped index and the S&P Global 1200 index, respectively.
The Spiva SA scorecard measures the performance of actively managed South African equity and fixed-income funds in rand against their respective benchmark indices over one-, three-, and five-year investment horizons. Passive index investors may have fared better than those with active fund managers, benefiting from Naspers’s 71% rise in 2017. In 2017, 74% of active funds investing in South African equities were outperformed by average benchmarks, the study found.
Over the five-year period, 79% and 93% of actively managed South African equity funds failed to beat benchmarks.
The local market experienced a surge in the second half of 2017, ending the year relatively well as the all share gained 17.47%. Naspers — with banks, financials and retailers — were the main drivers.
In the first quarter of 2018, industrials and mining stocks drove the overall index lower, with losses among financials relatively well contained. To a large extent the fortunes of the local market are linked to Naspers forming 19% of the top 40 index. Naspers has lost 15% so far in 2018.
US markets have been volatile, which may be an indication of greater nervousness about high valuations and a possible global trade war. The Dow had been up more than 240 points intraday on Tuesday, before ending the session down more than 300 points. Percentage losses were greater for the Nasdaq and S&P 500, which fell 3% and 1.7%, respectively.
Oanda analyst Craig Erlam said a similar pattern was evident in the previous week, when US equity markets posted significant losses on Thursday and Friday over concerns about an escalating global trade war.
The Dow has lost 3.5% so far in 2018.