Global economic activity is slowing due to increased US tariffs and uncertainty surrounding generally chaotic and aggressive US foreign policy. Financial conditions, which tightened meaningfully in the immediate aftermath of the April US tariff announcements, have moderated due to a sharp rise in asset prices. Erratic US government policy has negatively impacted consumer sentiment, consumption, business confidence and investment (though the decline in business investment has been less severe than expected due to resilient AI-driven spending). Consequently, US economic growth is beginning to weaken from a previously robust rate.
China’s nominal economic growth has been weak due to ongoing deflation and the consequences of a weak property market. The economy is now being further undermined by the escalating trade war with the US, which is expected to negatively impact Chinese exports and manufacturing. Positively, however, Chinese consumer confidence and spending may be improving from historically low levels, buoyed by more aggressive monetary and fiscal stimulus and targeted structural state interventions that have had some success in improving local consumption.
The Japanese and European economies are being negatively affected by elevated uncertainty regarding US tariff threats. Europe’s economy, which has been stagnating due in part to its export link to a weak manufacturing sector in China, will start to benefit from higher fiscal stimulus. Business confidence in Germany has started to improve following the decision to lift the debt ceiling and meaningfully increase fiscal spending on infrastructure and defence.
South African economic activity has been supported by higher export receipts (due to higher precious metal prices) and a mild cyclical recovery in real consumption as consumers benefit from falling inflation and interest rates. A more enduring lift to the growth of economic activity is, however, structurally constrained by the acute underperformance of transport infrastructure, poor service delivery from weak and revenue-hungry municipalities, inadequate (albeit improved) electricity supply and low business confidence. Disappointingly, the recent moderate increase in investment off very low levels has not yet been accompanied by any notable job creation. In recent years, there has been material progress made in moving to reform the economy through Operation Vulindlela (acting within the Ministry of the President) and the partnership between government and business leaders (targeting key priority areas needing reform). Additionally, the Government of National Unity has brought about positive leadership changes in key ministries and a renewed commitment by government to accelerate initiatives that address the country’s structural problems.
Consequently, following the dramatic economic decline of the last 15 years, there is room for optimism that the economy may stabilise and that the country may now follow a more constructive path. Yet, given the deep structural issues in the economy – most notably the sizable government debt burden and large, unskilled population with high unemployment levels – we believe that a modestly higher growth trajectory will take an extended period of time to engineer and that this path is beset with risks.
The Camissa Islamic Equity Fund was up 8.0% in the second quarter. It has returned 9.0% per annum over the last 10 years (versus 7.0% per annum for competitors). Since its inception in 2009, it has returned 10.6% yearly.
The Camissa Islamic Balanced Fund was up 5.9% in the second quarter. It has returned 8.0% over the last 10 years, ahead of competitors, up 7.6% on average. Since its inception in 2011, the fund has delivered 7.9% per annum, well ahead of inflation.
Positive performances were delivered by all asset classes, particularly local and foreign equity. Locally, key positive contributors included PGM miners and telecommunications stocks. Positive global equity contributors included JD Sports, Micron and Johnson Matthey. We are substantially under-weight in the US relative to our benchmark within global equities, and overweight in European and Japanese equities that are very attractively priced.
Currently, our portfolios have high exposure to platinum group metal (PGM) miners, telecommunications shares, together with a diverse range of other mispriced stocks, including mid-cap stocks. We also have a high exposure to longer duration government sukuks at present, which is offering very attractive inflation adjusted returns.
By: Camissa Asset Management investment team
Camissa Asset Management (Pty) Ltd is a licensed FSP.
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