The Johannesburg Stock Exchange (JSE) continued to improve further on the impressive previous quarter ending positively on 67554. This is largely as a result of the continued strength in the commodities prices which filtered through to the resource sector.
The residential and commercial property sector is up as interest rates remained unchanged. The banking sector also showed signs of improvement as consumers’ have been taking advantage of the prevailing low interest rate environment and restructuring their debt.
Growth stocks are preferred and seem to be attracting investors who are looking to compensate for the low yielding income investments. The rand has shown significant gains on the strong back of favourable commodity prices and strong JSE returns have been encouraging. Food retailers have shown sustained value amid some positive reports. Investors are warned that although markets are strong, there may be a retraction in the short term so cautious optimism is advised.
Inflation has edged higher as the latest audit showed that unemployment figures have worsened, which doesn’t bode well for the already strained economy. High Eskom tariff increases have had a knock on effect with the local markets being placed under pressure to increase prices. There is still no agreement on the public sector wage bill increases with unions threatening strike action, which could see the country being forced further into negative territory.
The local tourism industry seems to be picking up slowly, but until borders open up and global tourism brings back the much needed spend by foreigners, this sector will remain under pressure. The third wave of Coronavirus infections is now upon us with new daily infections upwards of 5000. This has seen government move from level 1 lockdown restrictions to level 2 in an effort to curb the spread. At this stage, the effect on local industry is not too severe as the sale of alcohol and tobacco has not been prohibited and movement is only partially restricted with a reasonable curfew in place.
The vaccine rollout in South Africa is still lagging when compared to the global response. On a positive note, the Johnson & Johnson and Phizer vaccines are available now and vaccine stations seem well organized and efficient, with general feedback being optimistic.
Employment figures are showing some improvement in the USA with businesses starting to respond to growing demand. Biden’s newly signed American Rescue Plan, which is a $1.9 trillion economic stimulus bill, will provide direct relief to speed up economic recovery by assisting households that have lost income due to the COVID-19 pandemic.
In the East, China is using up stockpiled commodities which has resulted in slower imports but global demand for resources has remained consistent. The aggressive Communist oversight of some tech stocks in that jurisdiction is concerning, as well as the continued “tit for tat” between China and America with further restrictions being implemented on specific tech distributors. Global tech stocks are still in focus as work from home continues and demand for new and innovative technology is developed in an effort to streamline business processes.
In the EU, the vaccine rollout has picked up some speed with 245 million doses having been administered across the EU by 28 May 2021. Many countries are easing some of the lockdown restrictions with the onset of the summer season however restrictions remain tighter in higher infection rate areas. In the UK, more than 40 million people have received at least one dose of a vaccine which has completed the first target groups. With regard to Brexit, there are still some issues around the Northern Ireland Protocol and tariffs charged on British exports, which are being addressed. The UK is also actively engaging in new trade deals, having recently signed new deals with Norway and Iceland and are currently looking to join the Asia-Pacific trade bloc.
It’s hard to believe that we already find ourselves in winter and at the end of the first quarter of the new financial year. I would just like to take this opportunity to wish our investment family well and I do hope that everybody is avoiding the winter chills and remains safe from any COVID related issues.