Adapting is the name of the game in a topsy-turvy time
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At the end of 2020 SA’s economy is likely to experience shrinkage five times greater than that experienced a decade ago during the global financial crisis.
Global trade is also expected to decline by a fifth, severely curtailing our exports, with inbound tourism being severely hamstrung.
During the second quarter a third of all economic activity came to an abrupt halt after the government imposed one of the most severe lockdowns globally as measured by Oxford University. To make matters worse, we have been among the laggards in relaxing these rules. Alarmingly, the SA economy lost a decade of growth this year alone — a huge setback.
But this picture is even more perplexing when one juxtaposes it alongside the 50% rally by the JSE all share index since March lows. SA equities were the second strongest performers in the emerging market universe in the past quarter, behind Argentina. The rally was led by a rebound in resources stocks, which more than doubled from March lows, driven by an improvement in demand, a weak currency and supply shortfalls.
The world’s largest commodity munching machine, China, revved back demand, being first in and first out of the current crisis. Of the miners, gold shares shone the brightest as the gold price hit a nine-year high. The rise of bullion is a mirror image of the greenback losing its lustre after the US Federal Reserve cut rates by 150 basis points to near zero.
Of all the horror stories the tale of Texas oil futures is the scariest — it plunged to an unprecedented minus $38 a barrel (no this is not a typo — demand froze during lockdown and there was insufficient container capacity to store oil, so buyers were in effect being paid to take crude.
This anomaly did not last, as oil staged its strongest rally since 1990 to trade at $41 a barrel as economies reopened. A more obscure commodity also benefited from the DIY explosion — US lumber futures spiked 85% since the beginning of April as those locked indoors used the opportunity to improve their homes.
Naspers and its European-listed next-of-kin Prosus also performed strongly on the back of a rebound in technology shares, with Chinese internet stocks also rocketing. Naspers continues to trade at an eye-popping 50% discount to the sum of its parts, with Tencent up 40% year to date and dominating its portfolio ...
Global trade is also expected to decline by a fifth, severely curtailing our exports, with inbound tourism being severely hamstrung.
During the second quarter a third of all economic activity came to an abrupt halt after the government imposed one of the most severe lockdowns globally as measured by Oxford University. To make matters worse, we have been among the laggards in relaxing these rules. Alarmingly, the SA economy lost a decade of growth this year alone — a huge setback.
But this picture is even more perplexing when one juxtaposes it alongside the 50% rally by the JSE all share index since March lows. SA equities were the second strongest performers in the emerging market universe in the past quarter, behind Argentina. The rally was led by a rebound in resources stocks, which more than doubled from March lows, driven by an improvement in demand, a weak currency and supply shortfalls.
The world’s largest commodity munching machine, China, revved back demand, being first in and first out of the current crisis. Of the miners, gold shares shone the brightest as the gold price hit a nine-year high. The rise of bullion is a mirror image of the greenback losing its lustre after the US Federal Reserve cut rates by 150 basis points to near zero.
Of all the horror stories the tale of Texas oil futures is the scariest — it plunged to an unprecedented minus $38 a barrel (no this is not a typo — demand froze during lockdown and there was insufficient container capacity to store oil, so buyers were in effect being paid to take crude.
This anomaly did not last, as oil staged its strongest rally since 1990 to trade at $41 a barrel as economies reopened. A more obscure commodity also benefited from the DIY explosion — US lumber futures spiked 85% since the beginning of April as those locked indoors used the opportunity to improve their homes.
Naspers and its European-listed next-of-kin Prosus also performed strongly on the back of a rebound in technology shares, with Chinese internet stocks also rocketing. Naspers continues to trade at an eye-popping 50% discount to the sum of its parts, with Tencent up 40% year to date and dominating its portfolio ...
