Market Analysis - March 2018



The US president appears to be determined to shake up the established ways of doing international business, with apparently few concerns about the effects on global markets. As such, in March investors were slammed with fresh worries about how cross-border trade wars would affect stock prices. This is not to mention escalating tensions in the Middle East, fuelled by some inflammatory rhetoric by Donald Trump. On top of this geopolitical strife, certain high-profile corporations were caught out in varying degrees of malfeasance. Facebook is the most prominent of these with regard to the social network’s sharing of confidential user information. This did nothing for investor confidence, and several of the market darlings of recent times went through substantial corrections.


On the local front the first flush of Ramaphosa good feelings began to dissipate as the country realised there is a lot more to be done to rid itself of the Zuma hangover. It is too much to expect the president’s New Dawn to take immediate effect, but over the longer term we are surely in a better position than we were just three months ago. The ratings agencies recognised the prospect of positive change, with Moody’s amending its outlook to stable while S&P kept its rating unchanged. This is broadly positive for the broader business environment, coupled with the suspension of key individuals in the former Zuma camp, notably SARS commissioner Tom Moyane.

Given the above, it would have been too much to ask markets in general to be positive. As such the only asset class to have produced positive returns since the start of 2018 has been bonds.



On the JSE, almost all equity sectors had a tough month, Healthcare being the only positive. The knock-on effect of the Facebook revelations perhaps fed through into the local Technology sector, which was the worst performer on the JSE, falling 25.6%. The major contributor to this fall was EOH, which lost close to 40% in March. Not much better were Consumer Services and Telecoms.

When looking at the Top 40 index, one has to acknowledge the heavy weighting of Naspers. After an outstanding run the share has hit headwinds, dragging down the overall index. Other notable contributors to the decline have been the ongoing sagas around Steinhoff (down 43% in March) and the Resilient group of Real Estate Investment Trusts. In the Resilient stable, Fortress lost 25.6% in March and has lost more than 70% of its value in the year to date. On the whole, then, the investment environment was quite poisonous with more than 50% of shares ending March negative.






The fund lost 3.8% in March. On the downside were Kumba Iron Ore (-19.2%), Northam Platinum (-14.8%) and of course Naspers (-11.6%).


Down 2.1% down for the month. The top holdings were Harmony Gold (up 19.1%) and

Clicks (up 7.7%). Losers were Naspers, AVI and Barloworld. March was the last full month for this fund under the old strategy. From April 1 it was merged with the Sir John Ross fund.


The fund lost 2.2% in the month. The fund benefited slightly from its short holding in EOH (down 39.9%) and Brait (down 19.51%).


The fund was down 1.2% in March, mainly due to holdings in Kumba, Exxaro and Northam. On the upside were CMH, Astral Foods and Clicks.


As illustrated in the introduction, the overall stock market was negative in March, with both foreign and local equity down. As a result, bundles with more cash and bonds performed slightly better than the more aggressive bundles.




Technical Review

While in February the JSE Top 40 was bumbling around the 52,000 technical support/resistance level, the index has now fallen well below 50,000 and there is no sign of an imminent reversal as more shares in the index continue to drop in value.


Emperor’s MSX-Monthly momentum indicator for March was at 51.05%, which does not indicate strong positive sentiment in the local market. The figure indicates the percentage of shares that showed upward trends. Measured in weekly terms the figure has fallen even further, to 40%.

As for market confidence, Emperor’s Rule of 18 indicates that stocks have come down in value but are still relatively expensive at 20.41.

As we move into April the most we can expect is some sideways churn since there is no clear impetus for a fresh bullish trend. We can take heart that the markets have not capitulated totally in the face of some severe international and local headwinds, so there is some cause for cautious optimism in the months ahead.

Happy investing.

Sihle Ndhlala

Junior Fund Manager


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