Global economic activity remains firm, but somewhat uneven. Financial conditions have gradually eased and developed market real household income continues to grow due to falling inflation, resilient employment and firm wages, while manufacturing activity has been weak and faces the risk of increased protectionism. The US economy is outperforming, with a strong labour market, meaningful increases in aggregate household wealth and increasing business confidence and investment.
Europe’s economy has been stagnating given its export link to China’s weak economy, scarring from the energy crisis and the eroding competitiveness of its automotive and chemical sectors. It should benefit from any rebound in global manufacturing activity from low levels. Japan is maintaining solid economic activity, driven by rising private consumption, strong wage growth and enhanced business profitability and investment. Additionally, a healthy increase in long-term inflation expectations is supporting the normalisation of monetary policy.
China’s economic growth has been weak in nominal terms given ongoing deflation. The very weak property market has meaningfully dampened consumer confidence, contributing to disappointing consumption growth. Policymakers are responding with more aggressive monetary and fiscal stimulus and structural interventions that may improve near-term economic activity.
Current South African economic activity is being somewhat boosted by a mild cyclical recovery in real consumption as consumers benefit from declining inflation and interest rates, together with recent once-off cash withdrawals from the two-pot retirement dispensation. Nevertheless, economic activity is constrained by acute underperformance of transport infrastructure, poor service delivery from weak and revenue-hungry municipalities, inadequate (albeit improved) electricity supply and low business confidence.
Following the election and the formation of the Government of National Unity, there have been positive leadership changes in key ministries and a commitment to attempting to 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 the country may potentially be setting on a more constructive path. Yet, given the deep structural issues in the economy – most notably the sizable government debt burden and a large, unskilled population with high unemployment levels – we believe that a modestly higher growth trajectory will take an extended period to engineer and that this path is beset with risks.
The Islamic Equity Fund was up 1.2% in the fourth quarter, and up 6.7% in 2024. The fund has returned 7.9% pa over the last 10 years. Since its inception in 2009, it has returned 10.4% pa, outperforming the other general equity funds.
Positive contributors included Omnia, Portland Pretoria Cement (PPC), Datatec, Rhodes, Pepkor and Altron. The key negative contributors for the period included Sasol, Glencore, Northam Platinum, Anglo Platinum and Metair. Global equity contributed positively, with the key contributors being Panasonic, Cisco Systems, Sekisui Chemical, Continental and Hochtief. JD Sports, Bayer, Koninklijke Phillips, Samsung Electronics and Persimmon all contributed negatively.
The Islamic Balanced Fund was up 1.2% in the fourth quarter, outperforming competitor funds. It was up 5.8% in 2024 and has returned 9.0% pa over the last five years. Since inception, it has delivered 7.7% pa. All asset classes contributed positively to fund performance with a particularly strong contribution from local stock picking. Key positive contributors included Datatec, Portland Pretoria Cement (PPC), Omnia, Pepkor and Rhodes. Negative contributors included Sasol, Glencore, Northam Platinum, Anglo Platinum and Metair. Positive global equity contributors included Panasonic, Cisco Systems, Sekisui Chemical, Continental and Hochtief. JD Sports, Bayer, JD.Com and Koninklijke Phillips all contributed negatively. We are substantially underweight in the US relative to our benchmark within global equities, and overweight in European and Japanese equities, which are very attractively priced.
Currently, our portfolios have high exposure to MTN, Omnia and Datatec together with a diverse range of other mispriced stocks, including an array of deeply discounted local mid-cap stocks. We presently also have a high exposure to longer duration government sukuks, which is offering very attractive inflation adjusted returns.
By: Camissa Asset Management investment team
Camissa Asset Management (Pty) Ltd is a licensed FSP.
www.camissa-am.com