JSE – what a performance!

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By Neels van Schaik

The market performance during July had the bulls cheering and the bears seriously scratching their heads. Equities had one of the strongest monthly performances fueled by renewed confidence about the global economic recovery. The jury is still out on this one.

The All Share Index gained no less than 10% during July, and the performance was spread across all sectors. General Mining had a strong performance, gaining 14.6%. On a 12 month return, the sector however still lags the market by 17.9%, with the market having lost 9.4% and general mining down 27.3% over the period. This is also the sector that is most sensitive to changes in the outlook for the global economy and the mining sector’s 26.7% rally over the last 6 months clearly illustrates growing confidence about the economic recovery.


Financials and Industrials also had a bumper July gaining 10.2% and 7.11% respectively. In the Industrial sector two of the biggest constituents, SAB Miller and Richemont both gained more than 15%.  Consumer goods, which consist of Food and Drug retailers, General retailers, Media and Travel and Leisure, gained 10% as well. Information technology is, however, the star performer over the last 6 months having gained 43%.

The Financial sector, that covers everything from banks to Life Assurance, is up 1.3% over the last 12 months, while the market has lost 9.4%, having gained 24% since January 2009. Life Assurance gained 36% since January and is now up 3% over the last 12 months.

Cash clearly has lagged the market performance since the beginning of th year, but over 12 months cash still remains the leader.  This is likely to change given the low yield that is currently available on cash investments.

The market has run hard though since its bottom in 2009. The rally that we have seen of late clearly is the type that sucks new cash in that has been waiting for the market to drop further post the bottom towards the end of last 2008. Investors that want to invest lump sum money should probably phase it in over a 3-to-6 month period.

We still think equities will outperform cash over the medium term, but given the recent equity returns, at a much smaller margin.

Source: Neels van Schaik, Alphen Asset Management, August 7, 2009.

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