In the words of the great Bon Jovi: “Wo-ah, we’re halfway there”. Yes, that does mean June is behind us and it's time for another quarterly analysis. Let's look at what happened in the second quarter of 2023.
So how did the Satrix Top 40 ETF do?
The second quarter of 2023 was mostly positive for the top 40 companies on the JSE: 25 of the top 40 companies were in the green. This was due to promising financial results and positive outlooks for the second half of the year. However, increased interest rates, continuous load shedding and South Africa’s controversial relationship with Russia dampened what could’ve been a great half of the year.
This quarter’s fluctuating performance is a perfect reminder that investing in the equity market is a long-term practice. As shown in the historical performance graph below, while there are ups and downs in the short term, the longer you’re invested, the better your chance of reaping the rewards.
At the end of the second quarter of 2023 (April-June), the Satrix 40 ETF closed at R71.27. That's a 0.17% increase on the previous quarter (R71.15). Although there is a minor gain, this gain could’ve been significantly more if it weren't for the 3% shed in the last 2 weeks, which was the market’s reaction to President Ramaphosa’s visit to Russia. However, year to date (January-June) the Satrix 40 ETF is up 3.77% from a price of R68.68.
Let’s look at the performance of some of these individual companies’ shares within the fund to understand the slight overall increase.
Gold Fields' impressive year continued as 2023’s JSE’s top performing stock. Its share price increased from R237 to R259.68 (+9.57%) –a 40% gain year to date (R176.15) and 70% gain compared to 30 June 2022 (R153). This is due to the gold price continuing to increase for the majority of the quarter.
The second quarter has been impressive for the banking sector as the likes of FirstRand, Investec, Nedbank and Standard Bank were all in the green. FirstRand experienced growth of 13.75% this quarter as their share price increased from R60.38 to R68.68, which is 10.12% up from the same time last year (R62.37). Investec’s share price increased from R98.98 to R106.38 (+7.48%) this quarter, this is up 21.72% compared to June 2022 (R72.37). Nedbank also experienced good gains as their share price increased from R216.85 to R228.69 (+5.46%), this is up 10.34% compared to the same time last year. Furthermore, Standard Bank share price grew 3.29% this quarter (from R172.81 to R178.50) and 15.04% year on year (R155.17).
The performance of the banking sector can be attributed to the hidden benefit of rising interest rates on banking reserves (endowment effect), however this benefit was offset by the increasing credit loss ratio as more consumers are finding it harder to repay their dues, which has limited bank performances somewhat.
Other big winners
Other winners this quarter include the likes of Woolworths, which seem to be leading the race in the retail sector as their share price is up 12.39% this quarter (from R63.93 to R71.87) and +32.48% year on year (R54.25). This is due to the successful sale of David Jones and a positive revenue forecast.
MTN recovered nicely towards the end of the quarter after hitting yearly lows in early May. The telecommunications service provider’s share price increased 8.66% quarter on quarter (from R127.47 to R138.51) and 4.90% year on year (R132.04). This is due to the group reporting increased revenue numbers and an increase in subscribers.
Also in the green yet again this quarter was Richemont, the luxury goods manufacturer. Record highs were experienced last quarter and surpassed this quarter as their share price was up to R3185.63 from R2834.50 (+12.39%). This was attributed to increased sales in the recovering Chinese economy and a share consolidation that the company undertook this quarter.
For the second consecutive quarter, Anglo American Platinum (Amplats) and Impala Platinum (Implats) are members of the losers’ club. Amplats closed last quarter at R954.00 per share, but this decreased to R868.51 (-8.96%) by the end of this quarter. Implats share price decreased from R163.8 to R128.10 (-21.81%) by the end of the second quarter. Amplats’ and Implats’ poor performances are a knock on effect from the poor results reported in the previous quarter. Lower production levels due to record loadshedding continue to bury the platinum powerhouses deeper than their own mines.
Another precious metals and mining company that remains underground this quarter is Sibanye-Stillwater. The company’s share price fell a further 20% this quarter from R36.63 to R29.30 and is 27.96% down from this time last year (R40.67). In addition to the reduced production due to loadshedding (public enemy number 1), the group’s poor performance was due to the news of a R190 million payday to Sibanye’s CEO, which didn’t sit well with shareholders.
Another big loser this quarter was AB InBev, the world’s largest brewer. The beverage manufacturer’s share price fell 10.40% this quarter from R1,189.01 to R1,065.33, however is still up 21.59% from this time last year (R876.13). The drastic decline this quarter was due to a social media campaign in the United States with a transgender activist, which was met with customer pushback and boycotts across the US. Sales decreased 25% in the month of May alone as consumers switched to competitors. It’s a tipsy time for sure for the parent company of SA’s largest brewery, SAB.
Overall, when investing in equity funds, it's important to stick it out long-term. This quarterly update helps you keep on top of factors that can influence the performance of both the broader market and individual companies to make it easier for you to understand your investment performance. So give it a shot: invest now, so you don’t end up like Jon Bon Jovi; 'livin’ on a prayer'.