Domestically, both equity and bonds have faced significant headwinds this year. The JSE has been impacted by impossible-to-predict big company-specific troubles, with many index heavyweights (Tiger Brands, Aspen, MTN and MediClinic) experiencing precipitous declines, while a c. 50% drop in the Resilient stable of property companies (Nepi, Resilient, Fortress and Greenbay) also weighed on the market. Local economic conditions remain poor following years of maladministration and those companies driven by domestic circumstances are having a tough time. Added to that, global emerging markets (EMs) have experienced a bear market of late, with a notable trigger being the first implementation of US trade tariffs against China. Nevertheless, domestically, we are seeing some green shoots of recovery as the political changes ushered in at the ANC elective conference in December start to take hold. Whilst the direction of change is ever so gradual an improvement, it would be folly for us to ignore the risks of slipping back to the disastrous years of the Zuma presidency. Government faces an uphill battle in turning around the SA economy and setting us on the path towards a sustainable recovery especially in light of the many headwinds both domestically and abroad facing the country. In light of this, we lower our stance from positive to neutral on SA equity and property.
For the full report and our views on each asset class, click here.
