The third quarter of 2021 was a tale of two halves. Healthy gains from growth assets were partly erased in the last few weeks of the quarter as concerns over the spread of the Delta variant of Covid-19, and the prospect of higher interest rates, weighed on sentiment.
Unsurprisingly, the pandemic remained in the spotlight in the three months to end-September. Global Covid-19 case numbers surged to 230 million, from 85 million at the start of 2021, as the faster-spreading Delta variant took hold.
At the same time, wealthy nations continued to make steady progress in their vaccination programmes while emerging markets fell further behind. In South Africa, case numbers rose to 2.9 million, up from 1 million at the start of the year, as the vaccination drive stuttered.
Alongside renewed concerns linked to the pandemic, markets also started to price in expectations that the US Federal Reserve would soon begin scaling back its bond purchase programme, and that interest rates may be hiked sooner than expected. Moreover, some uncertainty about Jerome Powell’s re-election as Fed chair in February 2022 began to set in.
A shift to risk-off sentiment in the second half of the quarter led to a sell-off of equities, particularly in developing markets.
In South Africa, interest rates remained unchanged through the quarter, with the prime lending rate held at 7% whilst inflation was kept in check..
Investor and business confidence remained subdued in the wake of the violent riots that swept through KwaZulu-Natal and Gauteng in July.
Amid the risk-off mood, the rand weakened 5% against the US dollar through the quarter as South African bonds became less attractive relative to their US counterparts.
In corporate news, Prosus issued shares and bought 49.5% of Naspers. This led to one of the biggest trading days in the JSE’s recent history. The move essentially halved Naspers’ weighting in local indices while pushing up Prosus’ weighting.
CoreShares Top 50 Q3 2021 review
Q3 2021 Returns
| CoreShares Top 50 ETF | 0.57% |
| S&P South Africa Index (fund benchmark) | 0.52% |
| FTSE/JSE All Share Index (ALSI) | -0.84% |
| (ASISA) South Africa General Equity Peer Group Average | 2.61% |
Below is a breakdown of the largest return drivers and detractors at a sector and share level.
Sector Level Return Attribution:
| TOP 3 CONTRIBUTION TO RETURN | |||
| Sector | Weight | Return Contribution | Absolute return |
| Financials | 18.38% | 2.56% | 14.79% |
| Communication Services | 5.11% | 1.17% | 24.32% |
| Health Care | 1.90% | 0.70% | 39.17% |
| TOP 5 RETURN DETRACTION: | |||
| Sector | Weight | Return Contribution | Absolute return |
| Real Estate | 1.36% | 0.00% | 0.25% |
| Materials | 39.40% | -2.10% | -5.66% |
| Consumer Discretionary | 24.71% | -2.89% | -12.42% |
Past Performance is not indicative of future performance.
Source: Morningstar, CoreShares and Bloomberg LLC.
Share Level Return Attribution:
| TOP 5 CONTRIBUTION TO RETURN | |||
| Share | Avg Weight | Return Contribution | Absolute return |
| MTN GROUP LTD | 2.65% | 0.99% | 37.39% |
| FIRSTRAND LTD | 4.28% | 0.91% | 21.24% |
| ASPEN PHARMACARE HOLDINGS LT | 0.95% | 0.65% | 68.16% |
| SASOL LTD | 1.96% | 0.53% | 27.05% |
| STANDARD BANK GROUP LTD | 2.45% | 0.39% | 15.94% |
| TOP 5 RETURN DETRACTION: | |||
| Share | Weight | Return Contribution | Absolute return |
| NASPERS LTD-N SHS | 10.24% | -1.62% | -15.82% |
| FINANCIERE RICHEMONT-DEP REC | 9.40% | -0.87% | -9.26% |
| IMPALA PLATINUM HOLDINGS LTD | 3.00% | -0.74% | -24.67% |
| SIBANYE STILLWATER LTD | 2.60% | -0.51% | -19.59% |
| BHP GROUP PLC | 9.09% | -0.43% | -4.73% |
Past Performance is not indicative of future performance.
Source: Morningstar, CoreShares and Bloomberg LLC.
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