Mindful investing Q1 | 2024

Global economic activity remains 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 in particular is demonstrating strength, with relatively strong consumption underpinned by a robust labour market, healthy immigration 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 from low levels, lower gas prices and increased government investment (particularly in the South). Japan is sustaining solid economic activity, with increasing private consumption partly due to high wage growth and improving business investment.  The very weak currency is also aiding exports and inbound tourism.

Following a very weak post-Covid reopening recovery, Chinese economic growth is very slowly accelerating, but is weak in nominal terms due to persistent deflation. Property market activity has been considerably weak for a sustained period and has depressed consumer confidence. Nonetheless, there is an improvement in exports, manufacturing and infrastructure spending.

Economic activity in South Africa is severely constrained by 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 levels – 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 hasten to stabilise the economy and prevent further decline.

The Islamic Equity Fund was down 3.4% in the first quarter and has returned 5.3% per annum over the last three years. Since its inception in 2009, the fund has returned 10.2% per annum. Key negative contributors for the period included MTN and certain materials companies. Positive contributors included some of the retail companies and food producers. Global equity contributed positively, with key performances from European industrial and chemical companies.

The Islamic Balanced Fund was down 1.6% in the first quarter, underperforming competitor funds (up 1.7% on average). It has returned 5.6% per annum over the last three years (competitors were up 8.6% per annum on average) and since its inception in 2011, the fund has delivered 7.5% per annum versus competitors, who were up 8.6% per annum on average. A negative performance from local equities was the main factor underpinning performance in the quarter. Key negative contributors for the period included MTN and certain materials companies. Positive contributors included some of the retail companies and food producers. Global equity also contributed positively, with key performances from European industrial and chemical companies.

Currently, our portfolios have high exposure to materials  and telecommunications companies together with 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.

www.camissa-am.com