Could S.African equities maintain high performing momentum? - CNBC Africa

Could S.African equities maintain high performing momentum?


by Trust Matsilele 0

South African equities perform well in the second quarter. PHOTO: Getty Images

The top four performing funds were diverse and among others were Coronation Financial Fund, Old Mutual Gold Fund, Allan Gray Equity Fund and Investec Value Fund.

David O’Leary, director of Fund Research at Morningstar SA told CNBC Africa that the funds were largely influenced by high exposures. 

"Each of those funds had high exposure to financials and/or natural resources exposure. Those two sectors performed particularly well through the first six months of 2014," he noted.

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O'Leary added that the second quarter was generally strong building on from the strong performance in the first quarter.

He however warned that, going forward this might not be sustainable.

"It’s not sustainable over the long term. These funds produced returns above 15 per cent for the first six months of the year. South African equity markets have performed exceptionally well over the past decade and longer. South African investors should keep in mind that they shouldn’t expect the same type of returns going forward."

O'Leary noted that global markets did very well together with emerging and developed markets the reason why there was a very strong performance among a lot of the South African unit trusts categories.

O’Leary also noted that the last three months have been predominantly driven off shore investment.


“In particular categories that had a lot of exposure to South African equities, the domestic asset categories and multi asset categories with the highest equity exposure gravitated towards the top of the performance chart,” said O’Leary.

O’Leary explained that, in the second quarter, the South African equity market performed just like most of the developed markets with 78 per cent returns from the Johannesburg Stock Exchange.

“It did payoff to be in the South African equities this quarter as opposed to globally, but generally the offshore investment trend also paid off.”

The offshore market also benefited from the outstanding developed markets returns of last year and the depreciation of the rand which seems to have flattened a little but still boosting returns to the South African investors buying investments offshore.

O’Leary noted that there were two consistent themes among those funds that performed well which were the value buyers and use of the financials and gold in helping buoy any funds that had meaningful exposures to those sectors.