Q3 Global Market Outlook

Despite the economic clouds darkening domestically, the second quarter of the year continued to witness an uptick in domestic equity markets. Drilling down further, of the 8 sub-sectors on the JSE all but two have made notable advances in the first half of 2019. The 2 sectors which continue to be plagued by a very tough operating environment domestically as well as ongoing regulatory and margin pressure in their offshore businesses are Healthcare and Industrials respectively. With Healthcare losing almost 20% of its value thus far in 2019 and domestic Industrials losing just under 6%, it is apparent that it has not just been plain sailing with a rising tide lifting all boats. Stock specific issues at Aspen, Netcare and Mediclinic as well as declining volume growth at a number of domestic facing Industrial businesses have continued to keep investors at bay. Domestic GDP data released during the course of June provided some insights into just how tough an environment it has been locally with the economy contracting by 3.2% during the first quarter of 2019. Such a poor growth outcome has continued to result in elevated unemployment (remaining stubbornly high at just below 30%) weighing on consumption driven demand and ultimately business confidence. With many JSE management teams of domestic businesses indicating that the current environment is even tougher than the global financial crisis of 2008/09, it is no wonder that such businesses continue to battle to grow volumes, pass on cost increases onto customers and escape the quagmire of negative sentiment weighing on their ratings.


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