The Johannesburg Stock Exchange (JSE) ended the quarter on an all-time high of 66138 following a significant recovery in most sectors of our stock exchange.
Resources are particularly strong with mines experiencing a resurgence in demand as global growth and consumption return. Some of the oversold sectors like banking and property stocks have seen a marginal recovery, although their debt burdens are still a cause for concern. It remains to be seen when and if we return to “the old normal” with people frequenting office and shopping spaces however those businesses with an online capacity have continued to do well during the lock down periods.
The historically low interest rates both locally and globally, have seen investors move from traditional income generating areas of investment into growth areas. This underpinned the positive returns in the markets.
Finance Minister, Tito Mboweni, delivered a sombre budget speech which seemed to focus more on damage control rather than growth, emphasizing the absence of reforms and interventions needed to decrease costs and increase revenue. Government needs to rein in wasteful expenditure by curbing the bloated public sector wage bill however an agreement with unions will be critical to mitigate the usual destructive and costly protest action, which would edge the country dangerously closer to the “fiscal cliff”. An extremely high unemployment rate will add to already strained negotiations and the economic impact of Covid is expected to remain an issue for the year ahead. The successful prosecution of those implicated in State Capture and corruption would go a long way to bolster global opinion of the ruling party and perhaps encourage further foreign investment.
There were very few changes to the tax landscape with a positive take-out being the government’s decision not to impose the potential R40bn taxes and that tax increases be kept to a minimum to avoid a “tax revolt”. Government undertook to allocate additional funds to SARS to improve technology and infrastructure, in an effort to rebuild its capacity to clamp down on non-compliance and assist with the collection of much needed taxes. A focus on stimulating business to allow for a more inclusive and productive business environment would be welcomed.
In spite of the negative economic headwinds and prevailing political uncertainty, this quarter enjoyed one of the best returns over the past twenty five years and one hope’s to see the market continuing along its positive trajectory.
In America (USA), we have seen the transfer of power to the new Biden administration and it is refreshing to see politics being played out through more traditional channels as opposed to on social media. Whilst Biden works to repair global relationships, it remains to be seen whether or not there will be opportunities for more participative growth between the regions. The continuation of Trump’s anti-China policies by global superpowers will hopefully de-escalate over time and instead focus on a more mutually beneficial operating environment.
In the Eurozone, the Brexit deal seems to finally be reaching some semblance of settlement, although there are a number of intricacies in terms of trade deals and arrangements that need to be ironed out. Whilst we have seen the GBP strengthen, it remains to be seen whether or not the United Kingdom makes use of its new found independence.
The East has been the leader in terms of recovery from the Covid-19 lows and we have recently seen trade agreements being signed. Given the level of savings in this part of the world, as well as the ability to produce, one could well see positive returns emerging from these countries.
Resources have enjoyed good demand, particularly with China coming back on stream and, as a result, the underlying oils and base metals are seeing strong growth. In some instances, a special dividend has being paid by these companies. Should the rest of the world return to some semblance of normality, we may see continuing demand for the resource sector of the global economy.
There has been some discussion among economists and analysts of a rotation out of tech stocks, who enjoyed concentrated spend during the lockdown period, into more traditional stocks. Time will tell if consumer’s habits have permanently changed and what effect this will have on high street retailers. Globally, there is talk of extra taxes on delivery services to help these high street retailers.
Global tourism and travel continue to struggle as the world waits to see how effective the role out of the vaccines will be against the ever-varying virus. It’s encouraging to see how quickly some parts of the world have begun vaccinating their population. Although South Africa has been slower than most, we have recently seen our frontline healthcare workers receive the Johnson and Johnson vaccine.
Important Updates:
We have recently changed the name of Ewing Trust Company Limited to Ewing Trust Company (Pty) Ltd. This is linked to improvements in our operational strategy that focus on embracing the ever changing corporate landscape in South Africa.
In terms of recent Financial Sector Conduct Authority (FSCA) guidance, there is a segregation of duties required in order to ensure independent oversight by financial service providers. In accordance with this, we will separate certain functions between Mandleve Trust Company Ltd and Ewing Executive Services (Pty) Ltd. This will have no effect on the services we provide.
As you are now aware, we have included encryption and password protection on reporting due to the requirement to comply with the new Protection of Personal Information Act (POPI). Although this can be frustrating for some, we will work with you to ensure we take into account your specific requirements for the protection of all of your personal information.
System development internally has resulted in us launching a new reporting program from the beginning of this financial year. This has been done to streamline processes which will allow our team more time to interface with clients and focus on individual’s specific needs.
Whilst business interruption seems to be the new norm, the team at Ewing’s have embraced technology and remote working, which has enabled us to remain on the right side of the digital divide. This has assisted with maintaining outstanding service levels and communication with our clients so we never lose sight of the most important objective; that is the trusted relationship with our investment family.