The Financial year ending has proved to be a particularly volatile one with most international bourses moving sideways over the last year, and slightly negative in the last quarter. The continued weakness in base metal and oils has significantly affected all resource based economies, of which South Africa is one. This has resulted in emerging economies falling out of favour with global investors. The oil price rebounded towards the end of the last quarter and we hope that this will indicate the return to some semblance of normality, both in the underlying oil and resource stocks. We have seen a recovery from the oversold positions in global resource stocks, and this bodes well for South Africa going forward.

The South African economy continues to teeter on the brink of a down grade from the international rating agencies. Despite the fact that for the time being our electrical outages have ceased, the political situation and the turmoil caused by the sudden change of Finance Ministers (twice), continues to draw negative international attention. In spite of the best efforts of Pravin Gordhan, the negative political situation could well result in a down grade during the second half of this year. During his budget speech, Pravin Gordhan changed little, bar capital gains tax, which have been increased for the next financial year. The balance of the budget speech made all the right noises, but it remains to be seen whether or not Pravin Gordhan has the power to implement these changes and curb the massive government spending that is currently taking place.

Internationally, the United States has retraced in value somewhat since its highs in November and December as a result of some concerns around the earnings of big industrial counters. The political situation in the United States continues to raise a few eyebrows, and it remains to be seen whether or not Donald Trump is able to gain further support. The European situation and the migrant and refugee crisis continue to put pressure on the European bourses, while the possible exit of the United Kingdom from the EU has caused not only the pound, but also the FTSE to retrace. All in all, political pressures have certainly had an effect on global markets.

The South African Stock Exchange reached a low at the end of January of 46282 but recovered somewhat towards the end of February. There is significant value in some of our favourite stocks, and good yields supported by strong earnings from our preferred companies. For the long term investor, the growth in dividends from these stocks provide satisfactory after inflationary returns. The Rand has strengthened to the major currencies but will continue to show extreme volatility, being such a thinly traded currency.

On a compliance note, we have had the roll out of TCF (Treating Customers Fairly) and shortly we will have the implementation of RDR (Retail & Distribution Review). This may have some effect on our clients and may require us to contact you with any changes which may be implemented by the Financial Services Board.

Another Act that has been rolled out globally is FATCA (Foreign Accounting & Tax Compliance Act) and CRS (Common Reporting Standards). This means that as Financial Institutions, we are now duty bound to collect all your tax information for both local and global investments. This information will then be shared with the local tax authority whose across-border sharing arrangement with global tax authorities means that everyone’s tax needs to not only be up to date, but disclosures made on all global investments. Our in-house tax department has been exceptionally busy collating all this information and ensuring that, wherever possible, client’s tax matters are current. Should you use an external tax consultant, please ensure that they have all the information they require.

I would like to take this opportunity of thanking not only my co-Directors, Gareth and Angela, as well as all the staff of Ewing’s for their service over the last financial year, and you, the client, for your invaluable support over what has been a particularly volatile period.

We look forward to being of service to you for the next financial year.

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