Gloomy third quarter for investors
South African investors experienced a gloomy quarter to the end of last month, with the FTSE/JSE All Share Index losing 5.8 percent, dropping from 58203 to 54824 points.
It was still up 3.9 percent for this year, albeit off the lows it descended to in December last year.
The resources sector, which was on a high at 47954 at the beginning of the third quarter, was down to 43469 by the end of it, a drop of 9.3 percent. The loss wiped out much of the year’s gains, but the sector was still up by about 5 percent since January 1.
The rand traded at R14.09 to the dollar at the beginning of the quarter, and at a weaker R15.16 by September 30.
Gold rose slightly, from $1409 to $1473.
Poorly-performing sectors have been financials, small- and mid-cap shares, and property. Industrial shares have been relatively flat over the quarter.
Samantha Steyn, the chief investment officer at Cannon Asset Managers, says the tough environment is a challenge for most companies.
“Despite a bumper start to the year for local markets, South Africa’s stop-start economic growth, and mixed signals from the government on policy reform, saw business confidence hit an all-time low in August. Then, further compounding the general mood of despondency, negative sentiment, policy uncertainty and Eskom-related anxiety saw the World Bank cut its 2019 growth forecast for South Africa by half-a-percentage point to 0.8 percent.”
On a positive note, Steyn says the difficult conditions have led to a substantially lower equity valuations, creating “enticing opportunities” in higher-quality companies that were previously expensive.
“While local industries will likely continue to be challenged by the weak environment, select companies that are supported by higher-quality or defensive attributes are also set to fare relatively better as we inch towards a brighter setting in the economic cycle,” Steyn says.
Looking at performance over the 12 months to the end of last month, the best-performing unit trust was the Old Mutual Gold Fund, which invests in local and offshore gold mining stocks. It returned 96.68 percent after costs, according to data provider ProfileData.
Offshore property generally did well, with the top-performing rand-denominated global property feeder funds up between 22 percent and almost 26 percent.
Other funds with outstanding results were the Investec Value Fund (up 31.37 percent), the Krugerrand Custodial Certificates ETF (31.56 percent) and the Investec Commodity Fund (30.30 percent).
Boutique fund manager Mi-Plan has clawed its way back into top place in the PlexCrown ranking of domestic managers of actively managed unit trust funds to the end of the third quarter. This is according to ProfileData.
The PlexCrown system rates individual funds according to risk-adjusted performance over five years. This means a fund is rated not only on its returns, but also on the degree of risk taken to achieve those returns and the consistency in its results.
After winning a Raging Bull certificate in January for third-placed manager for 2018, Mi-Plan took top spot for the first time at the end of the first quarter this year, but dropped to fourth in the second quarter.
The big contributions in the third quarter came from the Mi-Plan IP Enhanced Income and the Mi-Plan IP Inflation Plus 7 funds. Both moved from four to five PlexCrowns, which gave the manager an overall rating of 4.214 PlexCrowns, according to ProfileData.
Investec was in second place in the rankings, with an overall score of 3.965 PlexCrowns. Prescient, which topped the rankings at the end of the second quarter, has dropped two places to third, with 3.774 PlexCrowns.
Of the offshore managers registered with the Financial Sector Conduct Authority to do business in South Africa, the top three were Nedgroup Investments International, PineBridge and Schroders, respectively.