We are approaching the middle of the year already and the Coronavirus is still not a thing of the past. The Global infections have pushed over 10.1 million since the start of the year with a death toll over 501 000. The spread of the Covid-19 cases and the re-imposition of restrictions by certain states in the US to stop the spread has seen volatility continue. Back home South Africa’s economy contracted by 2.0% in the first quarter of 2020 which extends the technical recession that we found ourselves in the last quarter of 2019. On 24 June 2020, the FinanceMinister announced the supplementary budget. Treasury expects SA’s GDP to contract by 7.2% in 2020, while tax revenues are projected to fall short by R300 billion. The full impact of Covid-19 on the economy is expected to only show in the second and third quarter of the year. The positive development is that Treasury has become more pragmatic in its funding strategy. To name a few, they have a greater reliance on T-bill issuance to lower funding costs and the government will issue $2bn in the Eurobond market and draw down the sterilization deposits with the SARB.
The JSE All Share Index (up 7.7%) had a large turnaround since last month. Resource stocks (up 8.8%) were the best performing equity sector, followed by Industrials (up 8.3%). Financials were the worst performing (up 4.2%) but managed to deliver positive returns. Small-cap shares (up 11.3%) went from the worst performing to the best performing share in June. Mid-cap shares up 6.1% and Large-cap up 7.8%. The MSCI World Index ended the month up 3.2% in US Dollar terms while Emerging Market equities outperformed their Developed Market peers and ended the month up 7.4%. The South African Listed Property sector (up 13.4%) and the SA REITs sector (up 17.6%) had significant turnarounds since last month. The Rand appreciated 1.4% against the US Dollar, 0.5% against the Euro and 1.5% against the Pound Sterling. In June; the Oil price (up 16.5%) outperformed both the Platinum price (down 3.4%) and the Gold price (up 3.2%) in US Dollars.
