A continued sell-off meant February was a mildly negative month for global markets. Despite being relatively flat, emerging markets outperformed their developed peers in what was an interesting month. With many of the emerging markets, including South Africa, being large exporters of commodities, the improvement in commodity prices was a key driver of this outperformance. This was particularly true on the local front as the US dollar price of Gold rallied as investors sought store-of-value assets in uncertain, volatile markets. This contributed to some spectacular returns in resource shares which saw the local equity index end the month in positive territory. Also on the local front, the much anticipated budget speech did little to allay fears of a credit downgrade and boost investor confidence, with bond markets ending the month in negative territory. The Rand showed some appreciation against major currencies, but still remains well above levels we are accustomed to and it would seem that investors will need more convincing that the country is committed to improving economic policy.

The FTSE/JSE All Share Index had a positive month despite most global markets ending the month in negative territory. The index was up 0.6% for the month on the back of gains in the resource sector. February’s top performers were Anglo American (68.8%), Anglo American Platinum (41.5%) and Steinhoff (11.0%). The index’s worst performers in the February were Capital & Counties (-14.7%), Woolworths (-12.2%) and Discovery (-11.2%). Financials continue to be affected by the prospect of lower economic growth in a rising interest rate environment and ended the month down 1.5%. Resources had a stellar month posting a return of 15.6% as increasing commodity prices, particularly Gold, drove producers’ share prices higher. Industrials also struggled losing 2.9% for the month.

Anaemic global economic growth expectations continued to drag markets lower particularly with the US interest rate hiking cycle initiated in December 2015. The MSCI World Index fell 0.7% in February. US markets faired relatively well with the S&P 500 flat for the month with a return of 0.1% for the month. The other major developed markets underperformed the index; with the United Kingdom’s FTSE 100, Germany’s FSE DAX and Japan’s Nikkei down 1.0%, 2.7% and 1.8% in US dollars for the month respectively.

Despite slightly negative performance for the month, emerging market equities were buoyed by rising commodity prices resulting in some outperformance of their developed peers. To this extent, the MSCI Emerging Markets Index was flat, producing a return of just under -0.2% in US dollars for the month. After a torrid time in January, China’s main equity index, the Shanghai SE Composite, lost -1.3% for the month in US dollars. Economic indicators in the world’s second largest economy continue to be on the soft side; however the government is targeting growth of between 6.5% and 7.0% in 2016. The formalisation of this target range and the plans to achieve this indicates a strong commitment to fostering growth.

Notwithstanding a generally well-received budget, local bond markets ended the month in negative territory. The tabled budget did little to boost short term investor sentiment in a rising interest rate environment with concerns regarding slowing economic growth, the possibility of junk status and news of a possible rift between the finance minister and certain factions of the ruling party prevailing. As a result the All Bond Index (ALBI) lost 0.7% in February. Listed property bounced back with a return on 3.7% in February reversing the losses in the January. The slump in the first month of 2016 has seemingly brought buyers back to the market, with index’s largest constituents (Growthpoint and Redefine) showing strong gains in February. Cash returned 0.5% for the month.

From a foreigner’s perspective, the Rand showed marginal appreciation against major currencies, but is the worst performing emerging market currency year-to- date. The Rand appreciated 0.7% against the US dollar. The Rand also gained against the Euro, appreciating by 0.3%, while it appreciated by 2.5% against the Sterling Pound.

The upward movement in commodity prices was the standout event in February. The US dollar price of Gold continued its strong run in 2016 with a return of 11.1% in February; benefitting from increased risk aversion as investors sought store-of-value assets. In a reversal of the recent trend the US dollar price of Oil gained 3.5% as OPEC announced a freeze in production to curb the global oversupply problem. The US dollar price of Platinum also gained nicely (6.1%) in February.