Corospondent July 2014
Winter 2014Subscribe to Newsletter
Financial markets remain inherently unpredictable and rarely produce short-term behaviour that is exactly in line with expectations. It is useful for all market participants – professionals included – to remain humble in light of the limited nature of our collective and individual knowledge about how markets will perform in the short run.
The platinum miners are back at work. Commentators are at pains to point out that there were no winners in the strike. It’s true. The longest strike in this country’s history has been detrimental to all involved; devastating to mineworkers and those in surrounding and labour-sending communities; damaging to the producing companies involved; and harmful to the nation’s economic growth, trade balance, and ultimately, to its credit rating.
In the recent past, we have written frequently about retirement reform. The reasons should be obvious to most readers: retirement assets represent a significant majority of the formal domestic savings pool and the JSE’s market capitalisation, and the conversation about the future shape of South Africa’s retirement system has been on the agenda continuously since 2004.
Unfortunately, the poor start to the year in South Africa has not really shown much sign of improvement. Labour relations continue to dominate the scene, dragging down growth and undermining confidence. Although the protracted strike on the country’s platinum mines (led by AMCU) eventually came to an end late in the second quarter, this was followed in short order by a NUMSA strike targeting the steel and engineering sectors.
Equity markets maintained their strong run, with the MSCI World Index returning 5.1% in US dollars for the quarter. Although the US Federal Reserve continued to taper its quantitative easing programme, monetary policy remains very accommodative, with most members of the Federal Open Market Committee only expecting the first interest rate hike in the second half of 2015.
The bond market maintained a stable trend during an otherwise fairly eventful first half of 2014, confirming our contention that South African long bonds have already priced in a fair amount of bad news. We continue to expect that this year’s total return from bonds will be in line with the current yields.
One of the country’s most prominent black-owned mining houses, Exxaro came into being in 2006 as the result of a major South African empowerment deal.
International property stocks have contributed meaningfully to the returns of our global asset allocation funds since inception. Over the past five years, property indices have outperformed global equities, which themselves have doubled. Nevertheless, we continue to hold a number of global property stocks in our portfolios.
Global equity markets posted good returns in the second quarter, with a gain of 5.1% for the MSCI World Index (MSCI World) and 6.7% for the MSCI Emerging Markets Index (MSCI EM). That brings the year-to-date (YTD) performance of the indices to 6.5% and 6.3% respectively.
Modern Turkey emerged from the embers of the Ottoman Empire in the years after the end of World War I. The Empire had been vastly reduced in its territorial reach over the previous three centuries and, having been allied to the losing side of the war, saw its remaining Middle Eastern territories carved up between the British and French. After a brief further war with Greece, the Turkish Republic was proclaimed in 1923, with Mustafa Kemal becoming its first president. He would later be given the title Atatürk (‘Father of the Turks’) due to his role in establishing the republic.
Both Coronation Market Plus and Balanced Plus are flexible multi-asset class funds that reflect our best investment view and aim to outperform a balanced benchmark and inflation over the medium to long term.