Emperor Logo.png

Market Reviews 

Market Review - Sihle Ndhlala

August 2019

August, the peak month of the northern hemisphere summer, must have spoilt the holidays of every investment manager in Europe and the US. It was a rotten month all round. Spurred by many reasons, not least of which was the inflammatory rhetoric on the trade front by Donald Trump, investors fled for safety. The rush to “safe” first-world bonds made this the hottest market around -- but as is the rule with fixed-income assets, when prices rocketed, yields collapsed.

In certain territories, such as Germany, Switzerland and Japan, yields sat in negative territory: you would pay for the privilege of buying a bond. Really what you were buying was the secure knowledge that you would at least get all your money back at the end of the lending period. It meant that in August we reached the extreme end of the global risk-off scenario.


Beyond the simple fact that investors ran from the more risky stock market is the implication that they fear bad economic news just around the corner. During August there was an extraordinary amount of speculation about when exactly the next recession would strike. This kind of scary talk provided the backdrop to the month -- no wonder stocks collapsed in such dramatic fashion.

Emerging markets, deemed to be the most perilous, suffered a 5% fall, and the JSE All Share index didn’t fare much better, down nearly 3%. SA’s property market continues to be hammered, and in August fell another 3.6%.

Right across Europe and the US, stock markets were hammered by risk-aversion. Yet no matter how much it hurt over the course of the month, one has to bear in mind that performances in the year to date have not been bad -- indeed, in the case of the Nasdaq, a return of over 20% is not to be sniffed at.


As expected, political ructions also did damage. Brexit turmoil in the UK knocked the FTSE 100 down 5%, and in the Far East the Hang Seng index of Hong Kong was badly shaken by investor confidence during a month of increasingly violent protests. As if in sympathy, Japan’s Nikkei index also fell nearly 4%.


On the local market, the pain was shared across all sectors, with telecommunications taking the brunt of the selling pressure. Small caps and consumer services, reflecting the unsettled economic environment, were not much better - and there were no signs that financials and industrials would recover this year. This is extremely worrying for the SA economy. Basic materials have kept the JSE afloat this year, but this can’t continue forever.


As much as it is great to see gold and platinum stocks rocketing, they are seen as “haven” assets -- bought to provide a bedrock of safety for portfolios in volatile and increasingly bearish times. An obvious sign of consumer distress in SA was reflected in Shoprite’s financial results. The retailer reported 18.2% lower earnings for 2019, with operating profit down 8.2%. Numbers like these have become commonplace for JSE-listed stocks, which of course has contributed to the general tendency towards fear of risk among investors.


Considering the overall negative environment, the fund managed to keep its losses down to 1.22%. Most long positions had negative returns, but short holdings provided a strong hedge, along with selected global stocks that did well.

LONG- SHORT 140/40 (SJR)

The fund has stabilised well over the past six months, and weathered August’s ill winds very impressively. Up 0.14% in a falling universe, the fund benefited from internationals and its Top 40 short position.


The Core International bundle was the leading performer, outshining other bundles focused more on domestic assets. Although the Building Blocks bundles were hit quite hard, other bundles were resilient, most of them up or very marginally down.



The chart of the JSE Top 40 index shows a familiar holding pattern. Although it extended its losses by 2.9% in the month to the 49,320 level, the index remains in a long-term holding pattern dating back to 2014. There is strong support at 45,000 but an equally tough barrier at 55,000. For now we have to be patient because there is no clear signal either fundamentally or technically that things are about to improve

JSE Top 40 Index

Source: Bloomberg

Happy investing!

Sihle Ndhlala
Junior Fund Manager



This document is for information purposes only and does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe for or purchase any particular investment. Opinions expressed in this document may be changed without notice at any time after publication. We therefore disclaim any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use of or reliance upon the information. The value of participatory interests may go down as well as up and therefore is not guaranteed. The past performance is not necessarily a guide to the future performance. Emperor Asset Management is an authorised Financial Services Provider FSP 44978.



What’s your risk number? Calculate now

Take our risk evaluation tool and understand your risk profile.

Get started now