The quarter ending 30th November 2016 has been a volatile one as a direct result of global politics as opposed to market fundamentals. By far the biggest factor has been the ‘Trump’ surprise victory in the United States, and markets have behaved tentatively in anticipation of the roll-out of some of his policies. Although the Trump presidency so far is very different to the Trump electoral campaign, it remains to be seen how these policies will affect emerging markets. Between Brexit, the Trump victory and our local geo-political environment, markets have been reacting to political news and in all likelihood, this is set to continue.
Locally, the stress within the ANC and the ruling National Executive Council and their division with regards to Jacob Zuma’s continued presidency has once again been the focus of South African politics. This negativity, combined with very flat growth in South Africa has resulted in many local companies reporting deflated earnings in in low growth environment. Despite the negativity, we recently managed to avoid a ratings downgrade. The rating agencies have lowered our outlook to negative and this should be of concern to our Government and country, as it would mean that the expense of borrowing would increase and our Rand could suffer. Local entities will struggle to raise International funding.
Internally, as discussed above, politics has been the main focus this year. Despite this, the American multi-nationals continue to provide good, strong returns in terms of dividend growth and, in a low interest rate environment, some of these shares are becoming particularly favourable as a result of this. The United Kingdom continues to struggle with the policies around Brexit and there seem to be further cracks appearing on the European Nations, particularly with Italy now making noises of an exit. The destabilisation in this region has resulted in the Euro dropping to its lowest value against other International currencies for some time. We could see more uncertainty visiting this region should further rifts occur.
It is with deep regret that we include in this newsletter the fact that Andrew Ewing passed away on the 20th November 2016. Andrew was the Founder, long time Director and non-Executive Chairman of Ewing Trust Company (Pty) Ltd. His legacy and dedication to the business will be a motivating factor for those of us that remain for a long time to come. I would like to take this time to reflect on the huge, positive impact that Andrew had on so many lives in the legal and investment environment and we look forward to honouring his legacy of care, compassion and excellence going forward.
Our office will be closed from lunch time on 23rd December 2016 and will re-open on 3rd January 2017. We wish our staff and investment family a very happy and safe festive season.