This period has been volatile, both globally and locally, as a result of the significant geopolitical tensions prevailing predominantly under the Trump administration. The effect that Trump’s presidency has on daily volatility is unprecedented and his seemingly aggressive intent to enforce trade tariffs is causing concern.
From the end of February our Index was trading at just over 58,320 but retraced significantly dropping as low as 54,600 then recovering to 56,157. During this period we saw extreme fluctuations as a result of the immediate dissemination of information, which caused individual stocks to have massive intraday increases and pullbacks, making short term decisions difficult.
Cyril Ramaphosa’s continuing attempts to root out corruption has gathered traction and we have seen a number of state-owned enterprises and their Boards being restructured. Cyril Ramaphosa intends to raise $100 Billion in new investment flows from overseas investors while simultaneously attempting to redraft the mining charter, all of which bodes well for South Africa should this be achieved. International rating agencies have taken note of the above and once again, we have managed to avoid another ratings downgrade. The rand, after “Ramaphoria”, has weakened since the end of February to date, as some of the positivity has eroded since his appointment.
One needs to be aware that high unemployment and lack of growth in a low productivity environment continues to contribute to the sideways movement that we have been experiencing for the past three years. Investment returns have been pedestrian, at best, but we believe that over time equities will continue to outperform other asset classes. We are cognizant of the impact this low growth environment has had on the performance of some of our favourite stocks, but it is our opinion that investors should still remain associated with blue-chip stocks as opposed to taking on more high risk investments, thus ensuring the retention of good dividend producing shares.
South Africa is seen as an emerging market and as such, we are subject to the inflows and outflows. As a small section of the global economy, these can have significant impact on our exchanges. Inflation also remains of great concern.
Internationally, Donald Trump’s “trade wars” have caused global indices to react negatively and, although perceived to be positive for the United States, which is the engine of the global economy, this could have unintended consequences should other countries begin to impose sanctions on American imported goods.
Europe, in particular the United Kingdom, continues to suffer from severe indecision under the leadership of Theresa May with regards to the exit from the European Union. Unfortunately, this coupled with the recent Italian concerns around their political stability saw European markets come under some pressure.
China, however, has recorded good growth and the demand for raw materials, particularly iron ore and oil, has seen commodities increasing in value during the preceding three months. This bodes well for stocks such as BHP Billiton and Sasol. The oil price continues to recover as concerns around supply increase, which has caused the price to rise dramatically.
From a compliance point of view, we are now, as a result of enhanced due diligence, required by banks and other institutions to contact clients for updated documentation, as well as in some instances (retrospectively) prove source of funds. We apologise for any inconvenience but would like to ensure that we stay ahead of these ever-changing compliance requirements. This and Common Reporting Standards continues to be a global focus for the prevention of money laundering.
Online fraud is unfortunately a reality and Ewing Trust Company will never send you an email advising you of a change to your banking details and/or to pay into an alternate account. Any such email is an attempt to defraud you by inducing you to make payment into a fraudulent bank account. Please be extremely vigilant with regards to the sophisticated means with which fraud is being committed. If you feel that any email or communication from us is not in the normal course of business, please contact us immediately.
Historically, we have utilised the “first in, first out” rule regarding the purchase and sale of shares. This means that the shares purchased first were sold first off our system. The brokers have used the average costing rule, which groups all purchases/sales together and averages the cost price per share. This has resulted in differences between our cost prices and the brokers.
Due to SARS accepting the brokers tax documentation, and most tax practitioners using the brokers tax packs, we have worked with the brokers to bring our figures in line with each other. In most instances this has not affected any investors but others may notice a difference on this month’s reporting. These adjustments will reflect on your 2018 Financial Statements under the revaluation of shares.
On a final note, we are delighted to announce that Zanele, our wonderful receptionist, has recently moved upstairs to fulfil the position of data capturer. We welcome the addition of Kalan Billington who has filled the reception position.
Please note that our offices will be closed on 10th August 2018, due to the public holiday on the 9th August 2018.