In September the average prudential balanced portfolio returned 0.25% (Aug: 0.29%). Top performer is Allan Gray (1.23%); while Namibia Asset Management (-0.58%) takes the bottom spot. For the 3 month period EMH Prescient takes top spot for the second consecutive month, outperforming the 'average' by roughly 1.3%. On the other end of the scale Momentum underperformed the 'average' by 0.60%.
Our graph of the day below depicts a few interesting trend lines. Firstly, the blue line depicts one year rolling foreign investment flows into equities. Do these flows actually impact the JSE Allshare Index? Tracking the red line which depicts a 'blown up' movement of the JSE Allshare Index relative to the blue line, a close correlation between these two trend lines becomes very evident.
When foreigners withdraw from the JSE the JSE declines and vise versa. Foreigners have evidently withdrawn their support of local equities and have taken a neutral position. Can there be any expectation of this changing soon? Our view is that this is unlikely to change soon and will not be impacted even if the SARB raised its repo rate.
Tracking the black line which depicts the one year rolling total of net foreign equity flows, net foreign fixed interest flows and the SA trade balance against the green line that depicts a 'blown up' movement of the Rand: US Dollar index one can also see a correlation between these two trend lines. A negative black trendline lifts the green trend line, meaning that an outflow of capital weakens the Rand relative to the US Dollar. We can also see a decline of these capital flows since the end of the financial crisis and a virtual collapse since October 2013.
This negative trend has been caused for one by a decline in world commodity market but most likely also by a decline in SA's competitiveness as the result of the strong Rand. The decline in commodity markets was clearly impacted by the financial crisis and since then by reduced demand for commodities from China as the result of it restructuring its economy. The Rand of course has been weakening steadily over the past 4 years.
Can there be any expectation of this to improve?