February Market Review

By Gielie de Swardt, head of Retail Distribution at Sanlam Investments

The year is looking bright from this angle. While UK markets started February more tentatively than January, investor sentiment strengthened again and took well to the news that trade tariff deadlines were postponed, and that a second US shutdown would not follow the first. Even the US-North Korea Summit that ended in a stalemate could not put investors to bed for long.

European markets generally followed the positive global trend, with Spain in the lead. But news that Italy officially entered a recession in the final quarter of 2018 did some temporary harm to the Eurozone, and Italy’s growth forecast for the oncoming year has since been halved by the European Commission. Germany’s manufacturing data from the end of 2018 added further weight to the view that the Eurozone’s cash cow is heading towards a recession.

In UK markets, results showing a decrease in inflation figures for January calmed concerns that the Pound weakness during Brexit negotiations had led to spikes in inflation. The Royal Bank of Scotland announced profits had doubled in 2018 from 2017, but investors remained cautious and citizens turned toward retail therapy to soothe their anxiety with UK retail sales results showing monthly increases. The Pound then strengthened following rumours of Theresa May possibly postponing the date of exit from the Eurozone.

In Asia, Chinese stock markets started the month with a five-day holiday as part of the Chinese New Year. In the interim, the Nikkei was struck by Sony’s 8% fall and already flustered investors sold off as Trump suggested that the talks between the UK and China were unlikely to continue before another round of trade tariffs was implemented in March. Their fears evaporated as the tariffs were delayed, and Chinese markets shot up over 5%! India and Pakistan then grabbed the attention of Asian investors, and the markets sighed in response to reports of missiles fired on aircrafts. As the two countries continued their dispute over the Kashmir land region, Pakistan’s KSE 100 dropped over 3%.

The month of the National Budget saw the local markets (except property) continue an upwards trend, boosted by equities gaining over 3% and resources gaining 8%. In contrast to the UK, the retail sector struggled with both Woolworths and Truworths declining almost 9%. The listing of Multichoice on 26 February also caused some market interest, as investors mulled over the future of cable television.

During February 2019 the FTSE/JSE All Share Index (ALSI) gained 3.41% on a total return basis, while bonds lost 0.44%. The SA Listed Property Index (SAPY) lost 5.70% in February, and cash returned 0.55%. Internationally, the MSCI World Index gained 3.01% in Dollar terms and the MSCI Emerging Markets Index ($) gained 0.22%. This February the Rand lost 5.62% against the greenback and 4.89% against the Euro.

For the year to date, the ALSI and ALBI returned 6.31% and 2.45% respectively. Listed property returned 8.79% and cash returned 1.16%. Internationally, the MSCI World Index returned 11.02% in Dollars.