Despite a volatile year, 2019 ended on a high note for global equities as a result of:
- Firm Phase 1 trade agreement between the US and China;
- A decisive Tory victory in the UK, which paved the way for a less uncertain Brexit; and
- A backdrop of easy monetary policy.
On the local front…
The SA Reserve Bank kept interest rates steady at its MPC meeting in November. Notably, inflation was 3.7% due in some part to low food prices and a weak domestic consumer.
The rand came under pressure early in the quarter with news of a deterioration in South Africa’s fiscal position. From a weak position of USD/Rand 15.09, it recovered to a year-end rate of USD/Rand 14.10. Fundamentally, the rand has been supported by improving terms of trade, an improvement in the trade balance and very supportive global monetary policies.
Encouragingly, SA equities were buoyed by the improved global outlook.
Property: the listed property sector delivered a total return of 1.2% in Q4-19. The sector ended the year with -0.4%.
Financials: Q-4-19 delivered +2.8% and was flat for the year at 0.6%.
Industrials: this sector was up 8.9% for the year and flat for the quarter.
Resources: this sector performed strongly for the quarter at +13.8% and was up 28.5% for the year.
The All Bond Index produced a total return of 10.3% for the year.
Looking towards the global landscape…
Equities delivered 9% for the quarter and 26.6% for the year.
The US Federal Reserve cut interest rates by 25bp in October, and suggested that no further cuts were likely for the foreseeable future.
Significantly, the Chinese economy continued to slow. The trade war had a negative impact on Chinese exports and manufacturing during Q4.
Source: Prudential Investment Managers, Coronation Fund Managers.