Contributions to gains on the index have largely come from heavyweight industrial counters which have had rand hedging attributes, generating revenues from diversified international exposure and operations. Shares like Naspers, SABMiller, Richemont and MTN have all proceeded to make new all-time highs, aided in part by the rand which has shed in excess of 20% of its value against the dollar.
Rand weakening has been at the forefront of people’s minds as a series of international and domestic factors have taken their toll. Slow economic growth coupled with testing inflation data, labour issues (this time significantly in the manufacturing sector) and poor trade and current account data have been among the domestic reasons for our weakening currency, while the ongoing theme of the US tapering of stimulus has been the major offshore catalyst.
The nearing of the US reducing the amount of accommodative monetary policy currently in markets has strengthened the dollar and put pressure on commodity prices. This has started to offset what was a promising start to the year for local resource counters. The dollar denominated price of gold has suffered most this year and in turn affected our gold shares. The sector has more than halved in value over the course of 2013 while the spot price has shed around 35% from its highs.
Unsecured lending and credit retail have also come under focus as African Bank posted a significant loss that was largely as a result of an impairment relating to its Ellerines business. Shares such as Truworths and Foschini which were outperformers in 2012 have been severe underperformers this year amid growing concerns for the pressure consumers are under and the significant proportion of credit sales evident in their respective businesses.
Global market themes for 2013 that are likely to be prevalent in 2014 include the rate at which the Fed will reduce asset purchasing and the efficacy thereof relative to employment and growth. Global markets are also likely to be jittery in the first quarter as the US debt ceiling debacle finds itself under scrutiny once again. The possibility of the ECB introducing new stimulus measures is perhaps one of the reasons European equities seem to be favored over local equities at present.