The JSE All Share Index closed the month of March on 52,250.28, (which is 5.7% higher for the month) and is up 3.1% year-to-date. The rand was trading at its best levels this year, most likely due to the following three factors: (1) the Constitutional Court’s decision that President Jacob Zuma must pay back the money spent on his Nkandla homestead, (2) a smaller-than-expected SA trade deficit and (3) a weaker US dollar due to the unexpected increase in the number of people claiming they are jobless in the US in the previous week. Over the last few days South Africans have been waiting in suspense to see the outcome of Parliament’s debate on a motion to impeach President Zuma, yet the scandal-plagued President once again survived an impeachment vote, causing the rand to weaken by more than two percent and further solidifying fears of an imminent downgrade by global ratings agencies.

Since last week’s Constitutional court ruling, opposition party leaders, ordinary South Africans and even an anti-apartheid activist jailed alongside Nelson Mandela have called on Zuma to step down as all are in agreement that he has violated the constitution by using state funds to renovate his private residence. The ‘Guptagate Scandal’ has added insult to injury as reports have emerged that the Guptas are business associates of Zuma’s son, Duduzane, and have been linked with Zuma’s plan to spend as much as R1 trillion ($63 billion) on nuclear power stations in South
Africa. However, it was very much the general sentiment that Zuma would in all likelihood survive the impeachment threat, based on the overwhelming majority of ANC support in parliament, resulting in a continuance of South Africans feeling helpless about the political and economic situation of the country.

According to the Credit Suisse Research Institute’s Emerging Consumer Survey 2016, South African consumers are among the most depressed about their economic futures. The survey which places SA along with Brazil and Russia as the worst performing countries out of nine – the other six countries included in the survey are China, India, Indonesia, Mexico, Turkey and Saudi Arabia. Low commodity prices, weakened currencies and political risk in 2015 are said to have contributed most to the erosion of consumer and investor sentiment. Of course it doesn’t help that South Africa’s economy is set to grow at its slowest pace since the 2009 recession and faces a highly likely credit-rating downgrade, possibly before year end. Standard & Poor’s has a negative outlook on its BBB- rating, one level above junk. Moody’s Investors Service currently rates South Africa’s debt one level higher.

On a more positive note, the recent announcement that the Johannesburg Stock Exchange (JSE) will be receiving a competitor has been met with much media excitement. The ‘ZAR X’ Stock Exchange, which has won approval to become the first new South African bourse in more than 100 years, said it intends to start operating in September with the aim of enabling a greater number of lower-income investors to trade shares. Although this new stock exchange will not attempt to rival the JSE, it will provide much needed and welcomed competition in the financial landscape in South Africa.

After a stellar 2015 performance and some profit-taking in February, Montauk Energy Holdings once again soared last month emerging as March’s best performing share. The company, which operates large-scale renewable energy projects utilising landfill methane in the US, soared 59.1% month-on-month. Montauk was followed by Murray & Roberts Holdings Ltd and Impala Platinum – both up 40.5% month-on-month. Murray & Roberts’ share price received a boost from the announcement in March that it will be paid more than R159mn in relation to an ongoing claim around the Gautrain project. Last month Impala Platinum indicated that it planned to power its local refinery with hydrogen and methane-powered fuel cells within the next two years. At the beginning of March Lonmin (+38.6% Month-on-month) gave the market some clarity around its restructuring plans saying that it had trimmed its workforce by more than 5,000 in a restructuring exercise triggered by depressed commodity prices.

After a strong run this year and with the beleaguered rand showing some strength against the dollar, March saw several rand-hedge counters among the bottom-20 worst performers including Capital & Counties Properties (Capco; -2.8% Month-on-month), Richemont (-2.8% month-on-month) and SABMiller (-2.2% month-on-month).

After a slow start to the year for South Africa’s listed property sector – with the three-month long heavy sell-off of individual stocks – the sector is now on a good footing once again. This is after an impressive comeback since the sacking of Nhlanhla Nene as finance minister in December, which sent property share prices crashing as investor confidence in SA waned. At the time, increased political risk had been priced into listed property, sparking a wide sell-off in largely South African property companies. Offshore property companies were slightly spared given their hard currency exposure.


Globally, a more positive mood seemingly returned to world markets in March, boosted by expectations that the oil price was bottoming, glimmers of positive news around the Chinese economy, and investors being reassured about European markets following further stimulus measures adopted by the European Central Bank (ECB). Equity markets were also buoyed later in the month when Federal Reserve (Fed) Chair Janet Yellen said the Fed should proceed “cautiously” in deciding when to raise rates. These comments appeared to contradict the more hawkish comments from a number of Yellen’s colleagues earlier in the month.

In the US, the Dow Jones Industrial Average (DJIA) closed 7.1% higher last month (+1.5% YTD), its biggest monthly gain since October 2015. The S&P 500 Index advanced 6.6% from last month (+0.8% YTD) and supported by the +215 000 jobs created in the US in March, which was better than expected, it settled on a 3-month high of 2,072. The Nasdaq Composite jumped 6.8% for the month, now on 4, 914, although the index ended the first Quarter of 2016 with a 2.7% loss. Elsewhere the FTSE rose 1.6% month-on-month (-1.1% YTD), while the CAC 40 gained 1.3% month-on-month (-1.1% YTD) and the DAX advanced 0.7% month-on-month (-5.4% YTD).

In March the MSCI Emerging Markets Index rose by +13% in dollar terms, outperforming the Developed Markets Index by 6.5% and having their best month in 4.5 years. The currencies rose by +4.5% (included in the +13% return). The MSCI Brazil Index did best, up +30.3% in dollar, while the MSCI South Africa Index rose by an impressive +17.5% in dollar terms.

Investor concerns around China seemed to stabilise slightly with data from the world’s second-biggest econo-my in recent weeks showing a rebound in consumer sentiment. Among these, March data activity in China’s factory sector recorded growth for the first time in nine months. China’s Shanghai Composite Index was up 11.8% month-on-month (-15.1% YTD), while the Hang Seng Index rose 8.7% month-on-month (-5.2% YTD). In Japan the Nikkei ended the month 4.6% up on the back of a weaker yen, although the index was still down 12.0% YTD. Global financial analysts such as JP Morgan see global growth picking up in this quarter based on these positive signs.

In commodities news: crude oil prices extended losses in the recent week after comments by Saudi Arabia cast doubt whether a key producers meeting would reach an agreement to freeze output to address a global supply glut. Hopes for a deal at the April 17 gathering in Doha led by Rus-sia and Saudi Arabia had been a major driver of a rally in prices from near 13-year lows in February, but the latest comments by Saudi Arabia’s depu-ty crown prince, Mohammed bin Salman, signals a reluctance to freeze output unless others did the same, and this knocked down already low expectations of an accord.

The markets are looking for a curtailment of supply somewhere and there are renewed concerns over continuing oversupply due to comments from Saudi Arabia that it will agree to freeze production only if Iran and other major producers agree to do the same. Iran has been ramping up production after nuclear-linked Western economic sanctions were lifted in January, adding to the saturated market. Crude oil prices also came under pressure from reports that crude oil production from Iran increased by 250,000 (barrels per day) in March since the lifting of sanctions.

Most of our clients are well aware that Brenthurst has been a strong advocate of offshore investing for many years; firstly, due to the fact that we believed the rand was overvalued when it was at R6,50 to the dollar, and secondly because we also strongly believed that offshore markets provided much better investment opportunities than what could be found locally. Brenthurst has also actively sought out sectors and asset classes that are not available in South Africa, such as Biotechnology for example, which despite the substantial drop end of last year and beginning of this year, still provides the best return for the last four years and more. It remains our opinion that this tendency is not likely to change much in the future because (a) the local share market remains very expensive versus its profitability and (b) there is a more than 80% chance that SA could be downgraded in the following 6 to 12 months. Brenthurst is also able to arrange special access to the funds that invest in biotechnology-, demographic-, and health care- sectors which would not available for the general public. In the event that you feel your portfolio could include more offshore exposure, please contact your Brenthurst financial adviser without delay.