The STANLIB Namibia Managed Fund advanced 1% over the past quarter ended 30 June 2017.

The excess liquidity measures in emerging markets, which helped to strengthen commodity prices and emerging market currencies, started to roll over in the period. Developed markets like the US, Europe and the UK became more vocal about their desire and intent to normalize monetary policy by hiking interest rates, effectively stepping away from the highly accommodative policies followed post the global financial crisis back in 2008. Higher inflation rates coupled with sustainable economic recoveries, which remains key ingredients to justify such policy changes, still remain uncertain. Reduction in the size of balance sheets, both in the US and Europe, have also come on the agenda. The increased probability of macro-economic policy errors coupled with heightened global political uncertainty have increased overall equity market risk in general, although specific individual equity market opportunities started to present itself. Domestic cash (+1.4%) and bonds (+1.6%) outperformed domestic equity (-0.8%). International equity performed well (+5%) and continued its positive trajectory despite the 2.3% appreciation of the rand against the US dollar. In dollar terms, the MSCI Emerging markets delivered 6.4%, materially outperforming MSCI South Africa (3.6%) as well as the MSCI World Index (4.2%).

From a local sector perspective, the Resources index underperformed by declining 6% as commodity prices sold off post a strong rally. Financials also underperformed, with a marginal 0.3% increase as consumer pressure intensified whilst enjoying some buffer from downward trending inflation expectations. Industrials was the clear outperformer, advancing 3.4% which continued its year-to-date outperformance. Value underperformed growth style shares during the period, with Media and Technology still the key driver.

Equity valuation levels in general remain elevated, with a preference for income products which should still be able to deliver inflation beating returns without the risk of substantial capital losses in the former. Our preference remains skewed to offshore equities, where we find more value and conviction relative to the domestic equity market.

Looking ahead
We have positioned your Fund conservatively, given the extent of equity market gains over the past seven years, together with the level of valuations and continued uncertainty around the global growth path; we remain cautiously tilted to higher quality multinational companies that have a long-term history of compounding returns over time and are focussing on selective domestic equity opportunities.