GTC Trendline – June 2014
Equity markets resurgent
Both global and domestic stock markets overcame a brief and relatively mild sell off during the first half of April , surging into higher territory in the second quarter of 2014. An ongoing global economic recovery, diminishing concerns over Ukraine and Iraq, and stimulative monetary policy from central banks provided strong backdrop support to equity markets.
Geopolitical tensions
The second quarter produced its fair share of geopolitical news highlighted by the ongoing crisis in Ukraine and the battle between rebel and government forces for control of Iraq. Although neither situation had a long lasting or mate- rial effect on stock markets over the quarter, it raises con- cern on how armed conflict and other geo-political concerns tend to impact financial markets.
Local economic woes
Over the quarter the domestic market continued to be plagued by ongoing labour unrest which is having a serious impact on economic growth. Not only is it affecting eco- nomic growth but more seriously it is making the country’s ability to borrow abroad not only more costly but also more and more difficult. South Africa has reached the stage where our sovereign debt is now only one notch above junk status and this in itself often precludes many would be investors from participating in our global bond offerings.
Market commentary
April saw a widening in the trade deficit to a mammoth R13.026 billion (consensus was R11 billion) which was ex- acerbated by the prolonged AMCU strike in the platinum sector as well as a substantial slowdown in motor vehicle exports also as a result of strike action. The 24.7% decline in mining output for Q1 was the biggest quarterly contraction since 1967.
