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LOCAL MARKET COMMENTARY – APRIL 2018

04 May 2018

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by Anchor

The FTSE JSE All Share Index reversed March’s 4.9% drop, ending April 5.0% higher (down 2.1% YTD). A turnaround in some resources prices saw the Resi-10 jump 9.3% MoM (+4.5% YTD), while Industrials closed 5.7% higher (-4.0% YTD) and financials, up 1.6% MoM (and down 0.2% YTD), also reversed most of March’s losses. Market heavyweights BHP Billiton, Richemont, Naspers and Glencore, which together account for c. 33% of the JSE’s total market cap, all recorded monthly gains, while British American Tobacco (accounting for c. 11.9% of the index) lost 1.3% MoM.

Property was the best-performing sector in April, with an impressive turnaround largely being led by a partial recovery in the prices of companies in the beleaguered Resilient Group (Fortress Real Estate Investment Trust [REIT] -B-, Resilient, Greenbay Properties and NEPI Rockcastle). Six of the 10 best-performing shares for the month under review came from the property sector, with the Resilient stable’s Fortress REIT -B-, Resilient and Greenbay Properties accounting for the top-3 MoM performers. Fortress was April’s best-performing share, rising 46.2% MoM, while Resilient rocketed 35.5% and Greenbay jumped 35.0% MoM. These moves came after the Resilient Group gave a market update on a review of its finances. Resilient said an independent review (done by former auditor-general Shauket Fakie) of the allegations against it had thus far found no evidence of wrongdoing.

On the flipside, for the second month running, Steinhoff International Holdings was the worst-performing share, dropping a further 41.8% in April (it was down 43.1% in March). The company, which has failed to bolster investor confidence about its debt and accounting problems, saw its share price plunge further after news reports that its former Chairman, Christo Wiese is suing the firm for R59bn for claims related to investments made by Titan Group in the company in 2015 and 2016.

Meanwhile, the rand weakened 5.3% against the greenback to close April at R12.46/$1. This as US dollar strength, which has persisted since the upward movement of US 10-year Treasury yields over the past few weeks, continued into month-end with the dollar recording its best month since US President Donald Trump’s election.

While April’s local economic data releases were upbeat for the most part, the already debt-burdened SA consumer was further crippled by the implementation of a 1% increase in VAT, which came into effect on 1 April, a ZAc52/litre levy on fuel as well as petrol price and toll fee increases. March annual CPI was 3.8% according to Statistics SA data – 0.2% lower than February’s 4.0% reading and the lowest annual CPI rate in 7 years. On average, prices increased by 0.4% between February and March 2018. Meanwhile, March’s trade surplus rose more than expected, to R9.47bn and growth in private-sector credit extension came in slightly higher than forecast at 6% YoY in March.

 

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