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Monthly Wrap for July 2019

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Key Takeaways – Market Developments  
  • SA equities, as proxied by the FTSE/JSE All Share Index, gave back 2.4% on a total return basis, despite a marginal gain in global equities. Domestic sentiment was weighed downby banks, life insurers, as well as Eskom’s bailout plans and dismal financial results. SA bonds lost 0.7% as the benchmark R186 bond yield rose by 21 basis points to 8.31%. SA property ended the month in the red, declining 1.2%, while SA cash yielded 0.6%. For the YTD, SA equities (+9.5%) continues to lead other domestic asset classes (bonds +6.9%, property +4.8%, and cash +4.2%).
 
  • Industrials finished the month in positive territory, gaining 1.2%, boosted by the robust performance from consumer goods (+3.2%) and telecommunications (+2.4%). Key performing names included Pioneer Foods (+49.5%), Woolworths (+12.5%), and index heavyweight Naspers (+2.6%). Resources lost 5.2%, dragged down by general mining (-7.3%) and chemicals (-10.5%). However, platinum (+6.0%) remained favourable, underpinned by a higher PGM basket price and a weaker local currency. Financials (-6.4%) was the worst-performing supersector, largely hurt by banks (-8.8%)and life insurance (-7.2%). For the YTD, resources (+14.4%) have outperformed industrials (+13.1%) and financials (-1.8%).
 
  • The rand weakened by 1.7% in July to end the month at R14.34/$. So far, in 2019, the local currency is unchanged against the US dollar. SA equities saw net outflows of R-12.8bn in July, while SA bonds saw net outflows of R-6.9bn. For the YTD, foreigners continued to sell SA equities with an overall selling of R-42.2bn, while SA bonds recorded net inflows of R+9.5bn.
 
  • In US dollar terms, MSCI EM returned -1.1% behind MSCI World Index, which delivered 0.5%. Among global sectors, semiconductors (+6.2%) and tech (+2.1%) were the best performing sectors. In terms of regions, US and UK gained 1.4% and 2.2% respectively, while Europe fell 2.0%. Within EM, Turkey posted 11.8%, and SA (in US dollars) declined 2.8%. For the YTD, developed markets are up 18.0% while emerging markets delivered 9.5%.
  Key Takeaways – UT Industry  
  • Most global categories have outperformed the other categories both for the YTD as well as on a 12-month basis. The ASISA Global Equity General and the ASISA Global Real Estate General categories have generated average returns of 15.5% and 13.3% respectively, followed by the ASISA Global Multi-Asset High Equity category with an average return of 10.2%, so far in 2019. The STANLIB Global Balanced Feeder Fund continues to dominate the ASISA Global Multi-Asset High Equity category as the fund maintained its position as the leader of the pack over the past 1, 3, and 5-year periods.
 
  • The ASISA SA Multi-Asset Medium Equity and ASISA Multi-Asset High Equity categories yielded an average return of 6.3% and 6.1% respectively, for this YTD. According to the Merrill Lynch monthly domestic fund manager survey, fund managers’ asset allocation has become more defensive. On a 12-month view, more managers are bullish on domestic cash and bonds, while more are bearish on equities. Moreover, managers are overweight in domestic cash (expected total return of 7.7%) and offshore assets. Banks remain the preferred sector, followed by tobacco and general mining.
 
  • The ASISA SA Real Estate General category, which has been a long-standing poor performer, managed to gain a respite over the past year and YTD, generating returns of -2.9% and 1.3% respectively. However, there are still numerous challenges facing the sector over the short to medium term. The STANLIB Property Income Fund produced a total return (net fees) of -2.5% over the past year until July 2019, which is a much-improved performance compared to a loss of -27.2% as at the end of December 2018.