The correction on the JSE that commenced in May extended into June. Emerging markets continued to feel the pinch of investors withdrawing to the safety of developed markets, while a decision by the SA Reserve Bank to increase interest rates put further pressure on selected industrials and financials. An unexpected increase in South Africa's current account deficit rattled the rand and raised fears that the sharp decrease in the value of the currency would lead to additional interest rate rises in the months ahead.

Commodity prices, though, found support after falling from record levels. Resource shares bounced, helped also by the slump in the rand. After an exceptional first quarter the Sasfin TwentyTen fund suffered a dramatic reversal of fortunes in the second quarter dragged lower by heavy mark-downs of interest rate sensitive consumer and construction shares. The good news is that the government and private sector are committed to upgrading the infrastructure and despite a set back in equity prices the outlook remains positive.

Sasfin Twenty Ten is a specialist fund focused on areas "that will profit from SA's social and investment expenditure projects". An interesting theme in a period of big infrastructure spending. And helped by foreign buying of construction shares, it worked well in the first quarter, leaving Twenty Ten the sector's top performer for the period. But in the second quarter what manager David Shapiro terms "aggressive" foreign selling sent the fund crashing, exposing a risk of specialist funds: having too much of a good thing.

Financial Mail - 30June2006