INTERNATIONAL MARKETS – STRONG MONTH FOR GLOBAL EQUITIES

► S&P500, DOW AND NASDAQ CLOSE HIGHER

Global equity markets recovered strongly in June 2019 with the MSCI All Country World Index up 6.5% in the month, after plummeting 5.9% in May 2019, on hopes for a positive breakthrough in the ongoing trade nego-tiations between the US and China at a G20 Summit in Osaka, Japan.
US President Donald Trump agreed to hold off on new tariffs and allowed Huawei to once again purchase US products. Increased concern over global risks lifted expectations for further monetary policy easing by major central banks, which boosted risk appetite further.

In the US, the benchmark S&P 500 Index jumped 6.9% month on month (up 17.4% year to date; +3.8% in the 2nd quarter of 2019) and the Dow Jones Industrial Av-erage (DJIA) rallied 7.2% month on month (+14.0% year to date; +2.6% in the 2nd quarter of 2019) – its biggest June gain since 1938, according to CNBC. The tech-heavy Nasdaq jumped 7.4% month on month (+20.7% year to date), despite large-cap US tech stocks, a key driver of global markets for the last few years, coming under pressure in June as US regulators announced a plan to investigate anti-competitive conduct amongst these companies.
Major equity markets in Europe also gained ground in June, with Germany’s DAX up 5.7% month on month (+17.4% year to date; +7.6% in the 2nd quarter of 2019) while France’s CAC rose 6.4% Month on month (+17.1% year to date).

Despite the market’s ups and downs of 2019, The Daily Maverick reported that US stocks had their best first half of the year in over 20 years and that the US tallied its best six months for initial public offerings (IPOs) since 2014.

LOCAL MARKETS – DESPITE LOW GDP SHOCK JSE REBOUNDS IN JUNE

► MINING SHARES LEAD JSE HIGHER
Shock local GDP data released in June showed the SA
economy shrank 3.2% in the 1st quarter of 2019 –
a much bigger drop than consensus expectations of
a 1.6% decline and the largest quarterly drop in a
decade. The fall was driven by declines in manufacturing
and mining, with load shedding during the 1st quarter
emerging as a major culprit.

Despite this alarming news the local stock exchange
rebounded strongly in June with the FTSE JSE All Share
Index gaining 4.6% month on month (+10.4% year to
date). Mining stocks were at the forefront of the local
equity market rally, with large index constituents such
as Anglo-American rocketing 15.6% month on month,
Anglo American Platinum (Amplats) jumping 14.2%
month on month, BHP Group increasing 10.1% and
Glencore rising 5.7% month on month. Naspers, which
accounts for 19% of the index, climbed 4.4%
compared to May.

Strong iron ore prices provided a boost for diversified
mining shares, while gold miners were also higher on
the back of an 8% spike in the price of the yellow
metal. This resulted in the Resi-10 outperforming and
gaining 10.3% month on month (+16.8% year to date),
while the Indi-25 rose 4.1 % (+12.7% year to date).
The Fini-15 was the laggard but nevertheless
advanced 1.4% month on month (+3.7% year to date),
with major financial shares such as Standard Bank
(-1.0% month on month), Capitec (-1.6% month on
month) and Nedbank (-3.4% month on month),
recording disappointing month on month gains.

June’s top-performing share was AngloGold Ashanti
which rose 30.5% month on month, buoyed by the
rising gold price which jumped to above the $1,400/oz
-level for the first time since 2013. Harmony (+25.7%
month on month) was June’s second-best performing
share, while Cell C’s biggest shareholder, Blue Label
Telecoms (+24.6% month on month) came in third.
Rebosis Property Fund (REB) was June’s worstperforming
share, plummeting 29.2% compared to May.

In second spot, Omnia Holdings lost 20.4% month on
month. Another property share, Intu Properties Plc
(-20.0% month on month) was June’s third worst
performer.

►LIMITED DETAIL ABOUT FUTURE PLANS IN SONA
President Cyril Ramaphosa’s state of the nation
address (SONA) pledged strong support for Eskom,
reaffirmed the central bank’s mandate, promised
infrastructure spending on roads and water and a
long-awaited spectrum auction for the telco companies.
While it went off without a hitch, it was
somewhat light on the details. Meanwhile, tension
between competing factions within the ruling party
continued to hold the SA economy hostage.

ANC Secretary-General Ace Magashule opened the
Pandora’s box of the SA Reserve Bank’s (SARB’s) mandate
in early June, with News24 reporting that he
released a statement on the SARB, following a National
Executive Committee (NEC) lekgotla, which sent the
rand weaker early in the month. His utterances were
quickly refuted as misrepresenting the outcome of the
NEC lekgotla and Ramaphosa’s office released a statement,
with the president making his stand clear.

The SA rand traded firmer in the second half of the
month, as dovish DM central bank rhetoric and hopes
of positive trade talks between the US and China
supported the local currency. The rand strengthened
by 1.6% against the euro and 3.0% against the sterling
by the end of June 2019.

► FURTHER DECLINES IN VEHICLE SALES
The National Association of Automobile Manufacturers
of South Africa (Naamsa) reports that new vehicle
sales continued to decline in June 2019, although
lower passenger car sales had been offset by growth
in some of the commercial vehicle segments.

Reflecting on the new vehicle sales statistics for the
month of June 2019, Naamsa confirmed that aggregate
domestic sales at 45 939 units showed a decline
of 724 units or 1.6% from the 46 663 vehicles sold in
June 2018. Following a surprising decline in May
2019, export sales returned to register strong growth
of 3 819 vehicles (+14.3%), compared to the 26 785
vehicles exported in June last year.

Overall, out of the total reported industry sales of
45 939 vehicles, an estimated 36 922 units or 80.4%
represented dealer sales, an estimated 12.5% represented
sales to the vehicle rental Industry, 3.7% to
government, and 3.4% to industry corporate fleets.

Despite the tough market conditions Toyota had a
good month with strong sales of its popular bakkie,
the Hilux. The bakkie had its highest-ever recorded
monthly sales total in South Africa. Volkswagen’s Polo
Vivo remains the top selling passenger car.

Sources:
Anchor Capital, Momentum, Wheels24, The Daily Maverick