After a strong rebound in the first two thirds of the quarter, the Johannesburg Stock Exchange ended on a negative note primarily due to poor global sentiment. The All Share Index finished off the quarter at 55650 and although this is higher than the end of the last financial year, it is disappointing considering the good start to the current financial year.

Politically, in South Africa, we have seen the resurgence of Cyril Ramaphosa’s power base after the peaceful National Elections, however, his ability to implement some of the policy reforms remains to be seen. The proposed reforms could stimulate much needed economic growth in South Africa and improve investor confidence. A period of policy certainty with a focus on the eradication of corruption and wasteful expenditure would be welcomed, but state-owned enterprises, particularly Eskom, still pose a substantial risk to the South African economy. We hope that the newly elected cabinet will be able to mitigate some of these risks following the disastrous presidency of Jacob Zuma.

The Rand experienced volatility ahead of the elections but has gained some ground as the political unease leading up to the elections dissipates. The South African Reserve Bank recently cut its 2019 economic forecast from 1.3% to 1% with sluggish growth set to continue until Cyril Ramaphosa’s proposed policy reforms commence.

Despite a strong start to the year, global markets retraced from their highs during the course of May. A number of factors that contributed to the downturn in the markets include the uncertainty around Brexit, the resignation of Theresa May and Donald Trump’s continued trade wars with China and Mexico. Trump’s extension of trade wars and imposed sanctions has caused negative sentiment to return to markets, which is highlighted by global profit taking. If a compromise can be reached to end the current trade wars, we should see markets performing more positively.

Resources continue to perform satisfactorily as global demand underpins this sector. However, the slump in the oil price towards the end of the quarter, together with a drop in the Sasol share price, could see all resources being affected. Despite this, we remain invested in these sectors due to the strong dividend returns.

Elevated interest rates in the United States have not impacted global markets, which are awash with liquidity as Eurozone and Japan remain committed to keeping rates near or at zero.

The roll-out of enhanced FICCA requirements continue and we maintain our commitment to ensuring that we are, at all times, compliant with all new regulations. In light of this, we may be required to contact you from time to time to request updated identity documents and utility bills. Thank you for bearing with us through this process.

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