What’s driving our 2019 Q1 fund performance?

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29 April 2019
2019 started well, especially when compared to the last few months of 2018 when the equity markets fell sharply as a result of concerns of an escalating trade-war between the US and China, slowing economic growth in China, a forthcoming BREXIT and slowing global economic growth.  


The over 8% rise in South African equities in just over 3 months had more to do with the rise in equities globally than anything going on in SA.

US listed shares and global listed shares were both up over 12%, so it appears as if global investors are putting money back into listed markets all over the world in the first three months of 2019.

Looking closer at the local SA market, the resources sector was up close to 18% - thanks in part to stronger iron ore, gold and platinum group metals prices (commodities). It’s often noted that whenever there is economic news on China (good or bad), it tends to affect the price of commodities, which remains one of SA’s key exports.

It’s simply because China is the biggest consumer of steel in the world; in fact China consumes nearly half of the world’s steel output and it’s a similar picture for many other commodities.

Other sectors of the SA stock market, such as industrials and financials were negative. Mid cap stocks delivered a small positive performance.  

Stock focus: Naspers

Naspers is one of the biggest holdings (companies) on the South African stock market (JSE), and makes up about 20% of the total market capitalisation of the Johannesburg Stock Exchange (JSE). The share is currently priced close to R 4000 per share. It is well-known for its fantastic acquisition of Tencent, the Chinese gaming company, of which it owns 35%.

As Naspers makes up such a large proportion of the stock market, South African fund managers and pension managers typically cannot own enough of it, and so, the market capitalisation doesn’t represent the actual book value of the companies it owns.

To get around this, Naspers has decided to list its overseas investments in a new company (called Newco) that will be listed in Amsterdam on the Euronext exchange. Naspers will own 75% of this company. It has also recently unbundled Multichoice and listed it separately on the Johannesburg Stock Exchange.

All this should help lower the overall impact that Naspers currently has on the JSE, which should be better for fund managers and investors alike.


Our allocation to government bonds gave investors 4% over the first three months, more than we would have expected from pure interest, possibly as a result of the decision by Moodys not to release their much anticipated review on South Africa’s investment grade rating, and the fact that inflation expectations, currently at around 4.5%, remain very subdued.

SA Listed property

Following a few years of great returns, 2018 was a very rough year for listed property in South Africa, and 2019 does not seem to be much better, despite the marginal return of the sector thus far.

Property is particularly sensitive to poor economic conditions, where the investor return is impacted negatively by high vacancy rates in commercial and retail property. It remains a very concentrated sector with the majority of the allocations in just a few companies, namely Growthpoint, Redefine and Resilient.

Performance selected of investments for 3 months to the end of March 2019


There is no question that we are in a tough market, but we must be careful not to mix up politics with market performance. The two are not clearly related. Markets generally look at the bigger picture because they are more globally connected.

Adjusting your investment strategy purely based on politics alone isn’t a good strategy and it is generally better to remain invested.

We believe that South African investments are good value in the global context and over time we may see an improvement in returns we have seen over recent history.


Grant Locke 
MD: OUTvest
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