Global economic activity, already weakened by aggressive, hostile US foreign policy and persistent policy uncertainty, is now slowing further due to the severe energy supply shock triggered by the Iran conflict. Damage to energy infrastructure and the depletion of strategic reserves will have a prolonged impact on energy supply. The extent of any permanent scarring remains uncertain and will depend on the duration of the shock. Higher energy prices are raising a wide range of agricultural, manufacturing and transport costs, leading to an immediate squeeze in real incomes and a plunge in consumer sentiment. Financial conditions deteriorated materially in response to the crisis, driven by higher bond yields and weaker asset prices, but have eased recently with the sharp recovery in equity markets.
Although the US is more energy independent than many other regions, the negative impact on real incomes and depressed sentiment will weigh on activity. The US labour market is softening despite sharply lower supply from immigration, as companies delay hiring amid tariff uncertainty and AI-driven change, exacerbating skills mismatches and leading to more cautious workforce planning. Consequently, underlying US economic growth is now likely to run below potential, from a previously expected healthy pace.
China’s long-term energy strategy is focused on building strategic reserves, investing in renewables, diversifying import sources and maintaining significant reliance on domestically produced coal. This means that the negative impact of the energy supply shock on China may be relatively lower and may further support external competitiveness. Export activity remains very strong, with robust growth in developing economies offsetting the adverse effects of US tariffs. This is expected to remain supported by improving cost competitiveness. The drag on GDP from the property market weakness is now less significant, as the large cumulative fall to date means activity exposure is much lower. Greater monetary and fiscal stimulus, and targeted structural state interventions have not yet succeeded in materially improving consumer confidence, although fixed investment is beginning to rebound from low levels. Government actions to curb overcapacity and excessive price competition, together with higher energy costs, may be contributing to the end of a prolonged period of deflation and weak nominal economic growth.
Both Japan and Europe remain highly sensitive to the duration of the Iran conflict, given their dependence on imported energy. Europe’s manufacturing sector, already scarred by the energy shock following the Ukraine war, remains vulnerable to further competitiveness erosion, particularly from China. The Japanese economy is expected to maintain positive growth, supported by sustained labour market strengthening and gradually improving business investment. However, a more severe negative energy shock scenario could necessitate additional fiscal loosening and thus fiscal slippage from an already expansionary budget.
South Africa’s terms of trade have deteriorated from very strong levels, given declines in precious metal prices and increases in imported energy prices. Consumer activity, which had begun a mild recovery as falling inflation boosted real incomes and enabled interest rates to ease, is now at risk of an early reversal. A significant increase in online betting continues to divert spending from other goods and services. A long-term, sustained lift to economic growth remains structurally constrained by the acute underperformance of transport infrastructure (albeit improving), poor service delivery from weak and revenue-hungry municipalities, entrenched government corruption, organised crime and resultant low business confidence. Disappointingly, the recent moderate increase in fixed investment from very low levels has not yet been accompanied by any meaningful job creation.
In recent years, progress has been made in reforming the economy through Operation Vulindlela and the partnership between government and business leaders targeting key priority areas for reform. Additionally, the Government of National Unity has brought about positive leadership changes in key ministries and a renewed commitment to accelerating initiatives that address the country’s structural problems – although progress remains slow.
The Camissa Islamic Equity Fund was up 6.0% in the first quarter, outperforming the average of its competitor group, up 1.0%. Over the last year, it has delivered a return of 33.7%, significantly outperforming the average of the peer group, up 24.4%. It has returned 11.0% per annum over the last 10 years relative to the competitor average, up 8.5%. Since its inception in 2009, it has returned 11.5% per annum.
The Camissa Islamic Balanced Fund was up 4.2% in the first quarter, outperforming the average of the competitor group, which was down 1.5%. Over the year it was up 23.5%, outperforming peers that were up 16.2%. It has delivered a return of 9.4% per annum over the last 10 years, ahead of competitors, up 8.0% on average. Since its inception in 2011, the fund has delivered 8.6% per annum, well ahead of inflation.
Positive performance was recorded across all asset classes in the period, led by strong gains in local and global equities. On the domestic front, key contributors included Exxaro, Omnia and Glencore. Global equities also delivered positively, with key performances from Inpex, Scorpio Tankers, Albemarle and Micron.
Within global equities we are substantially underweight US equities relative to our benchmark, and overweight in European and Japanese equities that are very attractively priced. Currently, our portfolios have high exposure to Exxaro, Omnia and other basic materials companies, together with a diverse range of other mispriced stocks, including an array of deeply discounted local mid-cap stocks. We also have high exposure to longer duration government sukuks, which is offering very attractive inflation adjusted returns.
By: The Camissa Asset Management investment team
Disclaimer: The Camissa unit trust fund range is offered by Camissa Collective Investments (RF) Limited [Reg no 2010/009289/06], a registered management company in terms of the Collective Investment Schemes Control Act, No 45 of 2002. Camissa Collective Investments is a subsidiary of Camissa Asset Management (Pty) Ltd [a licensed FSP], the investment manager of the unit trust funds and a voting member of the Association for Savings and Investment SA (ASISA).
Fees and performance: Unit trusts are generally medium- to long-term investments. The value of units will fluctuate, and past performance should not be used as a guide for future performance. Camissa does not provide any guarantee either with respect to the capital or the return of the portfolio(s). Foreign securities may be included in the portfolio(s) and may result in potential constraints on liquidity and the repatriation of funds. In addition, macroeconomic, political, foreign exchange, tax and settlement risks may apply. However, our robust investment process takes these factors into account. Unit trusts are traded at ruling prices and can engage in scrip lending and borrowing. Exchange rate movements, where applicable, may affect the value of underlying investments. Different classes of units may apply and are subject to different fees and charges. A schedule of the maximum fees, charges and commissions is available upon request. Commission and incentives may be paid, and if so, would be included in the overall costs. Camissa has the right to close the portfolio to new investors to manage it more effectively in accordance with its mandate. Additional information is available free of charge on our website or from Client Service.
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