Market Analysis - April 2018

In April markets appeared to shrug off rising global geopolitical tensions, with US markets in particular ending the month on a positive note. This is not to say the month was not volatile, marked by jitters in the bond markets and pressures on the oil price, but investors seemed to be prepared to take on more risk. This had a positive knock-on effect on emerging markets such as South Africa.

On the home front, President Cyril Ramaphosa is doing the hard yards trying to build investor confidence as he tries his best to reorganise the ANC, government departments and parastatals. One should also take some comfort from Mineral Resources Minister Gwede Mantashe, who is making the right noises to global investors and appears not to be bowing down to local unions and political vested interests. The result of this positive mood was that the JSE resources sector was able to regain some lost ground, although the gold and platinum mines remain somewhat in the doldrums.

Overall, the JSE Top 40 index reflected the upbeat mood, increasing 5.38% in April, with more than half of all shares delivering positive returns. The rand weakened substantially during the month, down nearly 5% against the dollar, ending at R12.63/$, which translated into a nice bounce in Basic Materials (up 8.51%).

Other sectors were equally resilient. Industrials were strong (+3.24%), Consumer Goods (+6.46%), Health Care (+7.22%), Consumer Services (+4.86%), Telecommunication (+4.26%), and Financials (+2.02%). The only real blot on the local share landscape was Technology (-3.95%), bringing the sector’s losses for the calendar year to over 30%.

The standout shares on the Top 40 in April were Mediclinic (+15.55%), BHP Billiton (+13.06%), Richemont (+11.39%), and BidCorp (+11.19%). Some of the worst performing shares in the local index were Sanlam (-7.14%), Truworths (-4.68%), The Foschini Group (-3.91%), and Mr Price (-3.86%)

ROBERT FALCON SCOTT

The fund gained 3.2% in April, given a boost by Clicks (up 17.3%), Bidvest (up 9.4%) and Dischem (up 8.9%). Returns were muted slightly by Mr Price and Kumba Iron Ore (down 5.1%).

SIR JOHN ROSS

The hedge fund was up 0.6% in April. The general upbeat performance of the market dragged down our short holdings in Fortress (which was up 46.2%), Brait (up 19.9%) and MediClinic (up 15.5%).

UNIT TRUST-- EMPEROR MOMENTUM EQUITY

A negative return of -1.4% could be blamed on our holdings in Kumba Iron Ore, Mr Price and Coronation Fund Managers. On the upside, however, the fund benefited from strong returns by Naspers, Bidvest and Clicks.

EASY EQUITIES BUNDLES

Given the strong overall market, bundles benefited from the recovery in equities although more conservative bundles felt the headwinds from weaker bond prices.

Technical Review

The JSE Top 40 has recovered nicely from its March slump, when it fell below the 50,000 level. It has now almost regained its February highs. At 51,419 at the end of April, the index is approaching the 52,000 technical support/resistance barrier. If stocks continue to show resilience in May, this level may well be breached to the upside.