Market Update: April 2017
For South Africans, the ratings downgrades dominated the financial news during the month of April. Ratings agencies were quick to respond to Minister Gordhan’s replacement amid an extensive Cabinet reshuffle on 30 March. Standard & Poor’s was the first to downgrade South Africa’s foreign currency debt to non-investment grade (junk) and with it the local currency debt to one notch above junk. One day later Moody’s stated that it’s deferring its decision on SA’s sovereign credit rating, giving the rand a slight reprieve. A Moody’s review typically takes between 30 and 90 days. In the same week Fitch downgraded SA long-term local and foreign currency debt to junk.
Some good news is that towards the end of the month the Western Cape High Court ruled that government’s nuclear procurement processes were unlawful and it put aside any agreements reached. This is important, as Fitch clearly stated that a key driver behind its decision to downgrade SA’s debt was that Eskom has already issued a request for information for nuclear suppliers. Other good news is that SA posted an R11.44 billion trade surplus in March following a revised R4.78 billion surplus in February. Exports rose by 16% on a month-on-month basis. Consumer inflation also eased to 6.1% year-on-year.
Internationally, geopolitical tension intensified with the US-Russian relationship turning sour after a US missile strike in Syria, and North-Korea threatening to enter into warfare with the US, if provoked. Oil again fell below US$50 a barrel on uncertainty around the facts on US crude stockpile levels. In Europe, France’s PMI unexpectedly hit a six-year high, placing it ahead of Germany’s for the first time since 2012. The manufacturing and services index for the region as a whole was up too, exceeding economists’ forecasts and indicating job creation is rising to the highest level in almost a decade. Most international markets were robust. The Nasdaq climbed above 6 000 for the first time and the Dow surged on news of mostly strong earnings from several blue-chip companies. Good quarterly results reported by Alphabet and Amazon were an important contributor to the Nasdaq Composite’s new high.
Despite the downgrades the major SA market indices all posted positive returns during April 2017. The FTSE/JSE All Share Index (ALSI) gained 3.6% on a total return basis, driven by consumer goods and services, health care and technology. The SA Listed Property Index delivered 0.5% for the month and the All Bond Index (ALBI) and cash returned 1.47% and 0.61% respectively.
Internationally, the MSCI World Index gained 1.5% in dollar terms and the MSCI Emerging Markets Index ($) returned 2.2%. For South African investors who measure their gains in rand, the 0.5% appreciation of the rand against the dollar somewhat detracted from their experience of the MSCI World Index’s gain.
Sanlam Investments consists of the following authorised Financial Services Providers: Sanlam Investment Management (Pty) Ltd (“SIM”), Sanlam Multi Manager International (Pty) Ltd (“SMMI”), Satrix Managers (RF)(Pty) Ltd, Graviton Wealth Management (Pty) Ltd (“GWM”), Graviton Financial Partners (Pty) Ltd (“GFP”), Radius Administrative Services (Pty) Ltd (“Radius”), Blue Ink Investments (Pty) Ltd (“Blue Ink”), Sanlam Capital Markets (Pty) Ltd (“SCM”), Sanlam Private Wealth (Pty) Ltd (“SPW”) and Sanlam Employee Benefits (Pty) Ltd (“SEB”), a division of Sanlam Life Insurance Limited; and has the following approved Management Companies as defined in the Collective Investment Schemes Control Act, No 45 of 2002 (“CISCA”): Sanlam Collective Investments (RF)(Pty) Ltd (“SCI”) and Satrix Managers (RF)(Pty) Ltd (“Satrix”).
Although all reasonable steps have been taken to ensure the information on this website/advertisement/brochure is accurate, the Sanlam Collective Investments (RF) (Pty) Ltd / Satrix Managers (RF)(Pty) Ltd (Sanlam Collective Investments) does not accept any responsibility for any claim, damages, loss or expense; however it arises, out of or in connection with the information. No member of Sanlam gives any representation, warranty or undertaking, nor accepts any responsibility or liability as to the accuracy of any of this information. The information to follow does not constitute financial advice as contemplated in terms of the Financial Advisory and Intermediary Services Act, No 37 of 2002 (“FAIS”). Use or rely on this information at your own risk. Independent professional financial advice should always be sought before making an investment decision. The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium- to long-term investments. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Manager, Sanlam Collective Investments (RF) Pty Ltd / Satrix Managers (RF) (Pty) Ltd, a registered and approved Manager in Collective Investment Schemes in Securities. Additional information of the proposed investment, including brochures, application forms and annual or quarterly reports, can be obtained from the Manager, free of charge. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of the portfolio and the investor will differ depending on the initial fees applicable, the actual investment date, and the date of reinvestment of income as well as dividend withholding tax. Forward pricing is used. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The performance of the portfolio depends on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Lump sum investment performances are quoted. The portfolio may invest in other unit trust portfolios which levy their own fees, and may result is a higher fee structure for our portfolio. All the portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No 45 of 2002 (“CISCA”). The fund may from time to time invest in foreign instruments which could be accompanied by additional risks as well as potential limitations on the availability of market information. The Manager has the right to close any portfolios to new investors to manage them more efficiently in accordance with their mandates. The portfolio management of all the portfolios is outsourced to financial services providers authorized in terms of the Financial Advisory and Intermediary Services Act, 2002. Standard Bank of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments scheme/Standard Chartered Bank is the appointed trustee of the Satrix Managers Scheme.