Global and local political risk remained high in May, which was reflected in a generally subdued stock market. All investors are by now well aware of the volatile and unstable domestic environment which resulted in the ratings downgrade, and the expected but unwelcome news that the country has fallen into recession.
April was a great month for large-cap shares on the JSE, not so much for mid-cap and smaller companies, which suggested that investors were hunting for relative safety in a highly volatile environment. We have had everything from war talk with North Korea to the French and UK elections -- never mind all the stuff President Jacob Zuma and the ratings agencies were doing on the local stage.
At times like these, South Africans show their mettle. Or, if you’re an investor, their metal. Observers of our portfolios will have noticed that over the past six months we have steadily increased the weighting in the resources sector, which includes precious metals (Northam, Sibanye) and all the industrial raw materials produced by the likes of Kumba, Assore, Merafe, South 32, and of course the heavyweights Anglo American and Glencore Xstrata.
On Monday morning, South Africans started the week with shock and disbelief as President Jacob Zuma gave an urgent instruction to Finance Minister Pravin Gordhan and his deputy, Mcebisi Jonas, to return from an investor roadshow in the UK and US.