Investors in offshore equities will be delighted with the performance of their investments in the first quarter of the year, but those in local equities not so much.
The FTSE/JSE All Share Index (Alsi) went backwards over the three months, from about 76 900 points to about 74 500 points, a drop of 3.1%. Over a full year to March 31, it dropped by 2.7%, indicating that it was virtually flat for the latter nine months of 2023 (volatility excluded).
Looking at the Alsi Total Return index, which includes reinvested dividends, the figures are −2.2% for the quarter and 1.5% for the 12 months, according to Corion Capital’s Corion Report for March, with data supplied by Morningstar. This means that although share prices dropped, reinvested dividends boosted 12-month returns by 4.2%, pushing them into the black.
The various sectors performed as follows:
• Industrials: 0.9% for the quarter and 3.3% over 12 months, according to the Corion Report.
• Resources: 0.8% for the quarter, but down 10.7% over 12 months. Mining companies had a tough time in 2023, but commodity prices have bounced back this year. Peter Little, the fund manager at Anchor Capital, comments: “Gold miners were a major boost to the JSE’s performance (in March) as shares of these miners tracked the price of the yellow metal higher, with the gold price regularly posting new all-time highs (to take it almost 9% higher over the quarter). Platinum-group-metal miners also benefited from March’s bounce in metal prices.”
• Financials: Down 7.1% for the quarter, but up a respectable 12.7% for the year to March 31.
• Listed property: Up 3.8% and 20.5% respectively, showing a welcome turnaround in the sector after lacklustre performance for several years.
Commentary on inflation and the state of the economy comes from Sandile Malinga, the chief investment officer of multi-asset investments at M&G. In “Market observations: Q1 2024”, Malinga writes: “At its March policy meeting the SA Reserve Bank (SARB) voted unanimously to keep the repo rate steady at 8.25%, as expected. Governor Lesetja Kanyago remained hawkish regarding stubbornly high inflation (with Consumer Price Index inflation rising to 5.6% year-on-year in February from 5.3% in January, well above the expected 5.4%) and relatively high inflation expectations for 2024 among businesses and consumers.
“The economy managed to eke out growth of 0.1% in Q4 2023, worse than expected, for an annual rate of 0.6% for 2023 as a whole. The SARB has projected GDP growth at 1.2% in 2024 and 1.3% in 2025, the acceleration due largely to improved electricity supply.
“Equity returns remained depressed by the country’s low growth prospects and uncertainty over the upcoming national elections, both of which are keeping foreign investors on the sidelines.”
South African bonds fell by 1.8% for the quarter, with the yield on the 10-year SA government bond rising to 12% by March 31. Bonds were up 4.2% year-on-year.
The rand fell 2.2% against the US dollar over the quarter and 4.1% over the 12-month period – at the end of March a dollar cost you R18.85, up from R18.07 a year previously.
Global markets
Gains in offshore investments in rand terms would have been boosted by the drop in the rand. But even in dollars, the returns are impressive.
The S&P 500 index of the US’s 500 biggest companies was up 9.8% over the quarter (in US dollars) and a whopping 27.9% for the 12 months to March 31. The MSCI World Index, which reflects the global developed-economy equity market, was up 9.3% for the quarter and up 23.1% for the year.
M&G’s Malinga reports: “The first quarter of 2024 brought a continuation of the relatively bullish investor sentiment towards global equities seen in the last months of 2023, as prospects for growth in the US were buoyed by positive company earnings reports and supportive economic data that increased the likelihood of a ‘soft landing’ for the economy. On the other hand, global bonds were weaker as inflation proved higher than expected and major central banks kept interest rates on hold.
“The Japanese and US equity markets were the stand-out performers, while the UK disappointed and China continued to experience losses, although the magnitude of these fell as the quarter progressed, helped by small gains in March. Emerging markets were broadly in the red, with the exception of India.”
Unit trust performance
According to the Corion Report, year-on-year performance to March 31 in the most popular unit trust categories was:
• SA Equity General (R462 billion total assets under management): average 2.8%, best 17.0%, worst −6.7%.
• SA Multi-Asset High Equity (R679bn): average 9.3%, best 39.9%, worst 2.7%.
• SA Multi-Asset Low Equity (R244bn): average 8.5%, best 13.2%, worst 2.3%.
• Global Equity General (R309bn): average 27.0%, best 65.4%, worst 7.7%.
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