MINDFUL INVESTING in tumultuous times Q4 | 2023

Global economic activity should remain firm, benefiting from easing financial conditions and strong developed market real household income growth due to sharply falling inflation and higher wages. The US economy is demonstrating strength, with a relatively strong consumer underpinned by a very robust labour market and high aggregate household wealth.

Europe’s economy, which has stagnated given its link to China‚Äôs weak economic recovery, should benefit meaningfully from a rebound in global manufacturing activity and the ongoing normalisation lower of gas prices. In Japan, continued export growth, improving business investment and private consumption (due to re-emergent wage growth and aided by a large once off personal tax refund) is leading to sustained solid economic activity.

The Chinese economy’s recovery has fallen well short of expectations following the lifting of prolonged pandemic lockdown restrictions. Although contact-intensive service industries have experienced a strong recovery, property market activity has been very weak for a sustained period and has depressed consumer confidence. A recovery in exports, manufacturing and infrastructure spending, along with more decisive government stimulus measures should result in stronger near-term growth.

Economic activity in South Africa is severely constrained by an inadequate electricity supply, acute underperformance of transport infrastructure, poor service delivery from weak and revenue-hungry municipalities and chronically low business confidence. Additionally, the economic contribution from the mining sector that has benefitted from high commodity prices, is now far lower. For these reasons, coupled with the sizable government debt burden and a large, unskilled population with high unemployment – we remain pessimistic regarding the structural growth rate for the local economy. Gradual steps by government toward economic reform (now involving more productive private sector partnerships) need to speed up to stabilise the economy and prevent further decline.

The Islamic Equity Fund was up 7.0% in the final quarter, outperforming the peer group average (up 6.1%), and up 5.1% over the past year (versus 7.4% for competitors). It is up 11.7% over the last three years (versus 12.0% for competitors). Since its inception in 2009, the fund has returned 10.7% pa. Positive contributors in the fourth quarter included Anglo Platinum, PPC, Northam Platinum and Pepkor. Key negative contributors included Sasol, Adcorp, Sea Harvest and Oceana.

Global equity contributed positively to performance, with positive contributions from Johnson Electric, Micron Technology, Persimmon, SKF and Koninklijke Philips. Bayer, Nutrien, Albermarle, VMWare and Pfizer all detracted.

The Islamic Balanced Fund was up 5.0% in the final quarter, underperforming competitor funds (up 6.2% on average). It was up 6.9% in 2023 (competitors were up 12.2% on average). It has returned 10.4% pa over the last three years (competitors were up 10.3% pa on average) and has delivered 7.8% pa since its inception in 2011 (competitors were up 8.4% pa on average). A positive performance from global and local equities combined with a positive contribution from Sukuks, were the key factors underpinning performance in the fourth quarter. Anglo Platinum, PPC, Northam Platinum, Datatec and Pepkor contributed positively, whereas key negative contributors included Sasol, Thungela, Sea Harvest and Adcorp.

Positive contributions on the global equity front included Johnson Electric, Micron Technology, Persimmon, SKF and Koninklijke Philips. Bayer, Nutrien, Albermarle, VMWare and Pfizer all detracted.

Our portfolios currently have high exposure to PGM miners, Datatec and MTN, and a diverse range of other mispriced stocks, including an array of deeply discounted local mid-cap stocks.

By: Camissa Asset Management investment team

Camissa Asset Management (Pty) Ltd is a licensed FSP.