Fund review

The review of the FTSE/JSE All Bond Index in Q4 2024 saw the deletion and addition of Transnet bonds TN40 and TN30, respectively. The fund has been repositioned for this change and performed in line with its benchmark over the quarter.

The R186 Government bond remained the largest bond in the fund, its yield increased from 7.94% to 8.26% and its modified duration decreased from 1.92 to 1.79 over the quarter.

The fund’s yield increased from 9.74% to 10.1% and its modified duration decreased from 5.97 to 5.76 over the quarter.

Market overview

In Q4 2024, global markets were shaped by shifting economic factors, with U.S. equities driven by AI growth, particularly the contribution of the Magnificent 7 stocks, pushing the S&P 500 up 2%. However, MSCI ACWI fell 0.16%, and MSCI Emerging Markets dropped 8.1% over the quarter.

Bond markets were pressured by persistent inflation, while the U.S. dollar strengthened. The U.S. presidential election victory by Donald Trump introduced new risks and uncertainties, particularly with his stance on trade and tariffs, which may influence market volatility and international relations.

Locally, the market was similarly impacted by global trends, with local equities falling.

In the quarter, domestic equity markets underperformed, with:

The Top 40 Index returning -3.43%,
The All-Share -2.83%
The Capped SWIX -2.14%.

The rand weakened 4.2%, while sectors such as Telecoms (+8.7%) and Personal Goods (+11.5%) showed growth.

Despite Q4 weakness, South African equities delivered a solid 13.4% return for 2024, outperforming many emerging markets. Bond yields rose in December following a global trend which caused prices to fall. This upward movement in yields resulted in a capital loss that outweighed the accrued income from the bonds.

Despite this monthly dip, the All-Bond Index (ALBI) performed well over the year, posting a notable 17.2% annual gain, marking its best performance since 2003. The economy contracted 0.3% in Q3 2024, largely due to a drop in agriculture. There was no loadshedding over the quarter although water delivery remains an issue in certain provinces and municipalities presenting an obstacle to corporate investment in certain areas.

Corporate earnings, particularly in banking, were stable. Geopolitical factors like trade uncertainties, including South Africa's inclusion in the African Growth and Opportunity Act (AGOA), also weighed on sentiment, alongside domestic challenges.