April was a positive month for global markets with risk assets holding up well given an eventful month, which included notable central bank meetings and a commencement of the earnings season in the US and Europe. The upward momentum in commodity prices is a clear theme dominating markets in 2016. Most notable in April was the sharp increase in the US dollar price of Oil which is likely to result in an uptick in inflation numbers globally. On the local front, the continued recovery in commodity prices in April translated into positive returns from the resource sector. The local equity market provided a mixed bag of returns with modest gains overall. Interestingly local asset class performance converged in April; with equity, bond and listed property markets all producing very similar positive returns. Another prevalent trend in April was continued Rand strength, as the Rand was the 3rd best performing emerging market currency for the month of April.
The FTSE/JSE All Share Index had a positive month outperforming its emerging market peer group with a 1.7% gain for the month. April’s top performers were Kumba Iron Ore (45.4%), Anglo American (35.9%) and Exxaro (26.0%). The index’s worst performers in the April month were Steinhoff (-8.2%), Sappi (-5.6%) and Old Mutual (-5.6%). Resources led the way in April with rising commodity prices resulting in a 13.5% gain for the month. After a strong recovery in March, Financials faltered somewhat, producing a return of -0.3%. Industrials also struggled in April (-0.9%) as many of the large multinationals such as Naspers and SABMiller (nearly 40% of the industrials index) posted negative returns as the Rand continued to strengthen against major currencies.
There were few changes to monetary policy in the US and Europe, with rate hikes on hold in the former and an easing bias prevalent in the latter. In general policy makers were in a relatively upbeat, yet cautious mood, which saw the MSCI World Index post a US dollar gain of 1.7% in April. US market performance lagged behind its developed peers’ with the S&P 500 up a mere 0.4% for the month. In other major developed markets monetary stimulus and increasing investor risk appetite lifted asset prices higher. The United Kingdom’s FTSE 100, Germany’s FSE DAX and Japan’s Nikkei gained 3.4%, 1.3% and 4.5% in US dollars for the month respectively.
Emerging markets provided a mixed bag of returns in April with commodity producing nations benefitting from rising output prices, while those more focused on manufacturing disappointed. The MSCI Emerging Markets Index gained 0.6% in US Dollars for the month of April, bringing its YTD returns to 6.4%. Most notably, the slowdown in Chinese economic growth, albeit by less than expected, resulted in the Shanghai Composite Index posting a US dollar return of -2.4% for the month, which hurt emerging market performance as a whole.
The All Bond Index(ALBI) continued its positive trend for the year with a healthy gain of 1.9% for the month on the back of R20.2bn bond inflows. Attractive yields coupled with increased risk appetite has seen investors re-enter the market for local fixed income securities thereby supporting a recovery in bond prices. Listed property was the top performing major local asset class in April, but not by much, as asset class returns converged. The sector returned 2.0% for the month, bringing its YTD gains to 12.2%. Listed property’s performance was driven by falling bond yields over the period and its status as an inflation-hedge instrument. Cash returned 0.6% for the month, leaving YTD gains at 2.2%.
From a foreigner’s perspective, the Rand continued to gain in value against the major currencies. It ended the month 3.8% stronger against the US dollar, 1.8% stronger against the Sterling Pound and 3.3% stronger against the Euro. Year-to-date the Rand has appreciated by 10.2% against the US dollar, 11.0% against the Sterling Pound and 3.7% against the Euro.
Commodity prices continued their recovery in April. Most notably, the US dollar price of Oil was up 21.5% on the back of an improving global macroeconomic picture and a surge in outages. The US dollar price of a barrel of oil is now approaching the $50/bbl mark, representing an increase of 29.1% for the year. Platinum was the other standout performer in April, with the US dollar price rising by 9.1%; bringing yearly gains to 22.7%. The US dollar price of Gold too continued along its positive trend for the year, posting a gain of 3.9% for the month of April; bringing its yearly gains to 21.3%.