The local stock market followed the global trend with a negative start to the year, followed by a good rally during the second half of the quarter. After a decline of just less than 9% from the January 11 high to the February 5 low, the FTSE/JSE All Share Index yielded a total return of 3,9% for the quarter. Most of this can be ascribed to the strong March performance of 7,4%.
Financials perform
The best-performing sector for the quarter was financials, with the FTSE/JSE Financial Index yielding a total return of 9,9%. This was mostly due to positive monetary stimuli on the back of lower inflation, as well as an overall pick-up in consumer credit extension. The FTSE/JSE SA Industrial Index delivered a return of 4,4% for the quarter.
Resources took a breather
The sub-par return of 2,1% from the FTSE/JSE Resources Index over the quarter can be ascribed to a very negative start to the year. The index posted a return of -6,4% in January and -16,3% from the January 11 high to the February 5 2010 low.
The decline in resources shares was due to a broad correction in commodity prices, as well as a strengthening of the rand relative to the US dollar. While the CRB Commodities Index declined slightly in March (-0,5%), the Economist Metals $ Index showed an increase of 3,3%. Despite the rand’s continued strength, the FTSE/JSE Resources Index managed to yield a stellar return of 10,2% in March. This was most probably on the back of a 9,5% increase in the Baltic Dry Index — a measure of global bulk freight rates — which signifies an increase in demand for commodities.
The platinum price experienced an increase of 11,9% over the quarter, which boosted the prices of local platinum-producing companies. The gold price, on the other hand, delivered a more modest return of 1,5% for the quarter.
Fixed income rallied
After a slow start in January, the local fixed-interest market ended the quarter on a strong note. The BESA All Bond Total Return Index delivered a return of 4,5% for the first quarter of 2010. The good positive return was due mainly to a sharp decrease in the yield of longer-dated bonds. The All Bond 7-12 Year Index yielded a return of 5,6% while the All Bond 1-3 Year Index delivered a more modest return of 2,6%.
Global performance
The year 2010 started off with most global stock markets delivering negative returns in January. Nervousness returned to financial markets as scepticism about the sustainability of the economic recovery and the new bull market resurfaced.
However, this was short-lived and global markets experienced a strong rebound during the latter half of the quarter. The overall sentiment of global investors once again improved and, with the exception of China, most major stock market indices delivered reasonable returns for the quarter.
The quarter was also characterised by earnings reports from many companies that surprised on the upside. This was a good indicator of not only a stabilising global economy, but also further expansion in most regions.
The MSCI World Index ended the quarter up 2,7%. This was mostly due to a great March during which the index gained a very respectable 5,9%. The MSCI Emerging Markets Index managed to obliterate its four-week decline of 12,7% from January 11 to February 5 2010 and ended with a gain of 2,1% for the quarter. Most of the quarter’s gains came during March, which saw the MSCI Emerging Markets Index notching up a powerful 8,0%.
The continued global economic expansion resulted in a decline in the capital value of mature-market bonds, with the JPM Global Bond Index yielding a return of -1,1% for the quarter. Much of the damage emanated from the US during March, where the yield on the US 10-year Treasuries rose to 3,83%. The heightened appetite for riskier assets resulted in emerging-market bond yields declining, however, with the JPM Global Emerging Markets Bond Index yielding a return of 3,6% for the quarter.
Dr Prieur du Plessis is the Plexus group chairperson