• Stonewood AM

Geopolitics and a drop in August

Source: FactSet

South African equity markets fell in the month of August with the JSE All Share Index closing 2.4% lower. Financials were down 3.7% led by Discovery falling 11.3% after the National Health Insurance Bill was published by the Department of Health, potentially affecting its health insurance business.

Industrials closed 3.0% down, with Shoprite Holdings leading the fall at closing 30% lower. Resources remained relatively flat despite the price of Iron Ore dropping 21.3% in US Dollar terms. Small and Large-cap shares fell for the month while Mid-cap stocks came out positive.

The SA Property market fell a further 3.6% following last month’s fall, with continued negative sentiment towards the sector. SA Bonds ended 1.0% up, continuing its positive trajectory over the last 36 months.

Global Equities shed 2.3%. The rise of geopolitics across the globe prevailed especially in relation to the US-China Trade war and BREXIT. The MSCI World Index ended the month down 2.0% in US Dollar terms, however returned a 5% positive rand return due to the weakening of the South African Rand. Emerging Markets lost 4.8% for the month.

Global Bonds were up 2% in US Dollar terms while global property and cash remained relatively flat. The Rand depreciated against most major currencies, losing 7.1% against the US Dollar, 6.5% against the Pound and 6.0% against the Euro. Investors saw US Dollar Gold and Platinum returns increasing by 6.5% and 6.1% respectively, while Brent Crude Oil decreased 7.3%.

See below a graphical representation of market performance, showing the asset class returns for August (in ZAR):

Source: FactSet

Markets ended August generally lower both locally and abroad, see below data showing how the average fund in the different ASISA categories performed:

Source: Morningstar. Returns longer than one year annualised.

Funds in the SA Multi-Asset Low, Medium and High Equity categories ended 0.2%, 1.0% and 1.7% lower, respectively. Funds with no allocation to equities and are largely invested in income generating assets saw a rise of 0.6%, as per the SA Multi-Asset Income category. This is a continuation of what investors have experienced in the SA market over the last 5 years.

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