The South African equity market disappointed during the third quarter of 2019 after it had a good first half. The Shareholder Weighted Index (SWIX) decreased by 5.28% during the third quarter, with property shares returning a similar number of -5.34% for the quarter. The South African economy is still under pressure even though there was some relief in the GDP number for the second quarter of 2019, reading 3.1% annualised quarter on quarter.

The rand weakened against the US dollar and other major currencies during the quarter. It fell roughly 9.6% against the US dollar halfway through the quarter, then strengthened by nearly 6% in the beginning of September, just to weaken again and close the quarter at R15.16 to the USD. The weakening in the rand can mainly be attributed to trade war tensions and outflows of foreign investments.

Globally, we have seen a slight uptick in the market towards the end of the quarter after a small pullback midway through. The S&P 500 increased by 1.2% over the quarter, slightly lower than the all-time high reached in July. The trade war is far from over but has already had a negative impact on growth. With some economies slowing down, central banks responded with rate cuts during the quarter to stimulate growth.

The fund underperformed its benchmark for the quarter, returning -5.2% gross of fees, underperforming its benchmark by 100 basis points gross of fees. Our overweight position in Oryx Properties contributed most towards performance of the fund relative to its benchmark, while the overweight position in Fortress Reit was the biggest detractor from performance relative to benchmark over the quarter. The fund continues to be aligned quite closely to the benchmark due to the current volatile market conditions.

The South African equity market performed well during the second quarter of 2019 after it recovered in June. The Shareholder Weighted Index (SWIX) gained 1.9% for the second quarter of 2019. Property shares, still lagging, were only up by 1.3% for the quarter. The South African economy is clearly still under pressure, with the final GDP number for the first quarter of 2019 reading -3.2%. The rand saw weakening against the US dollar and other major currencies during the first half of the second quarter; it fell roughly 3.3% against the US dollar before strengthening by nearly 6% to close the quarter of at 14.08 to the USD. The recovery of the rand in the second half of Q2 can mainly be attributed to trade war tension easing and rate cuts in the US being factored in.

Globally, we have seen a significant recovery in the market towards the end of the quarter with all major equity indexes being positive for the second quarter and the S&P500 reaching new highs when it increased by 3.8%. The trade war is far from over, but the US and China put on the brakes, with no further tariffs put in place after their last meeting in June. There were some concerns in the US economy and talks of a rate cut in July gained momentum.

The fund underperformed its benchmark for the quarter, returning 3.4% gross of fees, underperforming its benchmark by 100 basis points gross of fees. Our underweight position in the ATTACQ contributed most towards performance to the fund relative to our benchmark, while the overweight position in Fortress Reit was the biggest detractor from the fund relative to benchmark over a 6-month period. The fund continues to be aligned quite closely to the benchmark due to the current volatile market conditions.