Kagiso Top 40 Tracker comment - Sep 04 - Fund Manager Comment19 Oct 2004
World stock markets in general ended the quarter in negative territory, with the MSCI World index losing -0.9%. US Markets were down for the quarter as a result of mixed economic data resurfacing doubts that the US recovery might be slowing. In addition major US indices were put under pressure by rising inflationary concerns, rising oil and commodity prices, geopolitical risks and investor uncertainty. For the quarter, the S&P 500 Composite Index and the Dow Jones Industrial Average were down 1.9% and 3.4% respectively.
The local market remained resilient despite the uncertain global environment. In August, the Reserve Bank unexpectedly cut rates providing additional support for the local economy and further extending the local spending boom. Rates were dropped by 50 basis points leaving the repurchase rate at 7.5%. Despite higher commodity prices and oil reaching multi-decade highs, the local inflation environment remains relatively benign.
The effect of higher oil and other commodity prices were largely offset by a strong R/$ exchange rate that prevailed during the quarter. The strong rand again resulted in a weak manufacturing and exporting sector as local businesses were faced with a barrage of cheaper imports and a slowdown in export revenue. Despite this, local markets were up strongly, with the All Share Index returning 17.4% for the quarter. The rand ended the quarter at 6,48 to the US Dollar, 4.2% weaker than the June 2004 closing level.
The main driver behind the strong performance of the All Share Index was the Resources Index, up 23.7% for the quarter, mainly on the back of higher commodity and oil prices. In particular, the Gold Mining and Oil and Gas sectors showed stellar performances - up 27.6% and 25.4% respectively. Financials and Industrials ended the quarter in positive territory, returning a respectable 16.5% and 11.4% respectively.
The Kagiso Top 40 Tracker Fund slightly lagged its benchmark, the FTSE/JSE Top 40 Index, by 0.2% (net of fees) for the quarter. The fund gained 18% (net of fees) for the quarter as compared to the total return of its benchmark that gained 18.2%. This can be attributed mainly to the futures held temporarily not matching the performance of the index, index rebalancing and the effect of corporate actions. One of the main detractors of performance was the Standard Bank BEE transaction which forced the fund to sell a portion of its holding at a 17% discount to the market and later to repurchase the holding at market prices.
Within the Top 40 Index the gold counters were the top performing shares, with Harmony and Goldfields up 35.5% and 34.7% respectively. Within Financials, Absa continued to build on its last quarter's strong performance, up 27.7% as rumors were confirmed that the bank was in discussions with Barclays regarding a possible corporate action. The worst performers for the quarter were Telkom (down 7.5%), Sappi (down 3.4%) and Nampak (down 3.1%). The following changes were made to the FTSE/JSE Top 40 Index during the quarter:
- Discovery was replaced by Edgars in the Index.
- The free float factor of MTN changed from 75% to 100%
- The free float shares in issue of VenFin decreased by 8%
- The free float shares in issue of Tigerbrands, Netcare and Nedbank increased
All index changes were timeously acted upon so as to minimise the relative risk in the fund.
Kagiso Top 40 Tracker comment - Jun 04 - Fund Manager Comment20 Aug 2004
World stock markets in general rose this quarter, with the S&P 500 Composite Index up 1.7% and the MSCI World Index up 1%. The Japanese economy continued its forward momentum driving the Topix up 1.1% for the quarter and 14.3% for the year.
Locally, the currency was again a significant influence on the local market as it strengthened by a further 1.4% over the quarter to R6.22 to the US dollar. This weighed heavily on the resources index, which ended the period down 13.6%. In addition, gold shares were negatively affected by the 6.6% drop in the gold price, taking the gold index down 26.3% for the quarter. The industrial index showed positive gains, despite the rand strength, ending the quarter up 1% as consumer confidence continued to improve. The financials index rose 2.9%.
The Kagiso Top 40 Tracker Fund outperformed its benchmark, the FTSE/JSE Top 40 Index, by 0.3% (net of fees) for the quarter. The fund returned -4.9% (net of fees) for the quarter as compared to the total return of its benchmark of -5.2%. This outperformance was primarily due to active futuresequity arbitrage on the part of the fund manager, as we keep cash levels to a bare minimum in the fund.
Within the FTSE/JSE Top 40 Index, the industrial counters performed well, with PPC up 21.9% and Nampak up 11.7%. Banking shares continued to build on their last quarter's strong performance led by ABSA (up 11.7%) and RMB Holdings (up 8.3%). The mining counters were the worst performers for the quarter with Harmony Gold down 33.8% and Anglogold down 24.9%.
The following changes were made to the FTSE/JSE Top 40 Index during the quarter:
- Nedcor's free float shares in issue increased by 42%.
- Discovery Health replaced Avgold in the index.
- Telkom's Free Float Factor Increased from 30% to 50%.
All index changes were timeously acted upon so as to minimise the relative risk in the fund.