Local elections and international tension with trade wars

The month of May was one of the worst months for local equity investors in the past 10 years. It may be said that the market has been subjected to a perfect storm.

The month of May was one of the worst months for local equity investors in the past 10 years. It may be said that the market has been subjected to a perfect storm. The uncertainty brought about by the local elections and the international tension with escalating trade wars between the world’s largest economies did not help an already expensive market. On top of this, foreign investors’ sales of South African stocks jumped to a record high as emerging-market index changes by compiler MSCI prompted money managers to adjust their holdings.

With the elections behind us and a new cabinet sworn in, South Africans again showed the world that our democracy is intact. President Cyril Ramaphosa’s new cabinet reflects an economic cluster that is somewhat smaller, but with members that are equipped to deal with the challenges ahead. Equity markets were in favour of the appointments and rallied by 2.26% for the week. This happened despite global markets extending their selloff.

China and the US again exchanged threats during the past week, as hopes for a quick resolution of the ongoing trade battle continued to diminish. China’s state media warned that the US should not underestimate the country’s ability to safeguard its interests. China, which controls 90% of global rare earth mineral production, again threatened to halt the export of rare earths to the US. The minerals are essential raw materials for many high-technology products. The country also halted purchases of soybeans from the US. President Donald Trump said the US is not ready to make a trade deal with China and that tariffs could easily go substantially higher, though he remains optimistic that the two sides will eventually reach an agreement. Trump and his Chinese counterpart Xi Jinping are expected to hold talks on the side-lines of the G20 meeting in Osaka, Japan, at the end of June.

Trade tensions put a damper on global growth expectations and this in turn had a negative effect on the price of Brent crude oil. The commodity traded 4% lower at $66.40 per barrel. This is good news for importers of oil and for consumers in terms of lower fuel prices. 


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Market data provided by I-Net | News article provided by Securitas with 4D Wealth

Fanie Wasserman, B. Com (Hons)(UJ), PDFP (UOVS), CFP®fanie@securitas.co.za
Johan Steyn, RFP®, Cell. 082 680 9510, johan@securitas.co.za
Albert van der LindeB. Com (US), B. Com (Hons)(UP), Cell. 076 087 3084, albert@securitas.co.za
Hannes Bresler, CFP®, B. Com (Hons)(UJ), Pr. Tech Eng, Cell. 082 823 7973, hannes@securitas.co.za

Michelle Kleinhans, 082 850 3092, michelle.kleinhans@securitas.co.za