May 2016 market overview

In May, as in April, the political high brass of South Africa continued to face job uncertainty. This month speculation was rife that Minister Gordhan’s arrest was imminent – prompting the Finance Minister to issue a media statement to address these rumours. Despite growing political uncertainty the judiciary, the Reserve Bank and National Treasury continue to demonstrate their strength. Of concern is unemployment edging higher to 26.7%, the highest since 2008, and mining production falling by 18% with large gold and platinum mines halting unprofitable output. Some good news is that CPI eased to 6.2% for the year to end of April 2016.

Internationally, the UK kept its key rate at 0.5% and Euro zone inflation remained negative at -0.1% for the year up to 31 May 2016. Saudi Arabia appointed a new Energy Minister with a view to stabilise its oil policies and Brent crude broke through the $50/barrel mark for the first time this year. On the stock market, Berkshire Hathaway gave Apple shares a boost with its announcement that it has bought more than $1.1bn of the company’s shares.

Market performance was mixed during May. The FTSE/JSE All Share Index gained 1.8% on a total return basis. With the extraordinary 9.5% depreciation of the rand during the month, dollar investors in the ALSI lost 7.8% for May. The All Bond Index (ALBI) and inflation-linked bonds returned -1.49% and -0.80% respectively this month. Cash returned 0.61%. On the global front, the MSCI World Index and MSCI Emerging Markets Index posted a 0.6% and -3.7% return respectively for May on a total return basis (USD).

Source: Stats SA, I-Net, Bloomberg, Deutsche Bank and Sanlam Investments | One-month total returns up to 31 May 2016