Growth to date in 2021
With all the challenges of 2020, the year concluded with a strong bull run. In December alone, local shares were up by 5.5% and the listed property sector up by almost 14%. There was an expectation that this positive momentum would continue in 2021, however, January was a mixed bag. Local markets were predominantly strong except for listed property that dropped, whereas international markets were generally under pressure.
In this article, we'll indicate the growth of all major asset classes until the end of January and compare it to inflation in Namibia, which currently officially stands at 2.7%. In South Africa, inflation stands at 3.2%. We indicate inflation specifically because only growth above inflation is considered actual or “real" growth. Let's kick off with money market investments or cash:
• Money market investments are instruments that generate interest up to a maximum term of 12 months. At the moment, our Capricorn Enhanced Cash Fund offers a market-leading return of 4.13% per annum, after costs and after-tax, while 12 months fixed deposits and treasury bills offer around 4%. With inflation close to 3%, the asset class still offers a real return, although it is still much lower than most investors are used to seeing.
• Bonds grew by 0.7% in January and 8.5% for the past 12 months, which is also excellent growth above inflation. There is still good value in bonds in the future, given the expectation of interest rates to remain low for a long time.
• Listed property, as mentioned earlier, was in the red in January by 3.2%. The 12-month growth of the asset class stood at -35% at the end of January. We are still optimistic about the possibility of profitable growth in this asset class the year.
• Local listed equity was up by 2.6% for the month and now stand at a solid 20% over the last three months. 12-month growth to the end of January was 8.2%.
• Foreign stocks in developed economies, measured in Namibia Dollar terms, were up by 2.1% for January, largely on the back of a weaker SA Rand.
Foreign markets, as already mentioned, were under pressure in January, and only the Asian markets showed any significant growth. The Chinese markets, the Hang Seng index and the Nikkei index ended positively in January, while the American and European markets were all in the red. Commodities in U.S. Dollar terms did well, although the gold index dropped by 2.6% in January. Oil has recovered with a growth of 7.3% but is still around 40% lower over the past 12 months.
In February, overseas markets currently all show strong growth with oil taking the lead in the commodities sector. Let's hope this positive sentiment remains for the rest of the month.