In the second quarter, global economic activity has proved surprisingly resilient in the face of the energy supply shock from the Iran conflict, supported by enormous AI capital expenditure, very strong US and Asian financial markets, and a reasonably buoyant US consumer environment.
The US labour market is healthy, with persistent tightness resulting in a sustained boost to wage growth. Consumption has been lacklustre recently, with a squeeze in real incomes from higher energy prices partially offset by tax cuts. The AI capital expenditure boom continues to make a significant contribution to economic growth, supporting elevated business investment and household consumption through rising equity wealth.
China’s nominal economic growth has been weak due to ongoing deflation and the consequences of a weak property market. Export activity remains very robust, with solid growth in high-tech products. Greater monetary and fiscal stimulus, together with targeted structural state interventions, has yet to materially improve consumer confidence.
Europe’s manufacturing sector, already scarred by the energy shock following the Ukraine war, has seen its competitiveness erode further, particularly relative to China. On the positive side, the labour market remains resilient (especially in the South), and Europe is set to benefit from higher fiscal stimulus (particularly in Germany). In Japan, there are early signs that strong wage growth is finally translating into a more sustained recovery in real household consumption. This improving domestic backdrop is supported by a significant increase in AI infrastructure exports.
In South Africa, consumer activity is already at weak levels and has been further impacted by increased energy prices and an increase in interest rates. 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 by the government to accelerate initiatives that address the country’s structural problems, although progress remains slow.
The Camissa Islamic Equity Fund was up 4.1% in the period, outperforming the competitor group average, down 0.2%. Over the last year it has delivered a return of 28.8%, significantly outperforming the competitor average, up 15.2%. It has returned 11.3% per annum over the last 10 years compared to the competitor average, up 8.4% per annum. Since its inception in 2009, it has returned 11.6% annually.
The Camissa Islamic Balanced Fund was up 3.2% in the period, outperforming the competitor group average, which was up 2.8%. Over the year it is up 20.4%, significantly outperforming competitors at 12.4%. It has delivered a return of 9.5% per annum over the last 10 years, ahead of competitors, up 8.4% on average. Since its inception in 2011, the fund has delivered 8.7% per annum – well ahead of inflation.
Global equity contributed positively in the quarter, with key contributors being Applied Materials, Micron and Netapp. We are underweight 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 a high exposure to Omnia, Bytes, Exxaro, PPC and other basic material companies, together with a diverse range of other mispriced stocks, including an array of deeply discounted local 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: 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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