“The violence and looting that erupted in the week of July 12-16 after the imprisonment of former president Jacob Zuma was disconcerting,” says Pottier. “But we encourage our clients to remain invested and stick to their plan.”
He pointed out that the JSE All Share Index closed the week of the protests in positive territory, up 0.22%, buoyed largely by resource counters on the back of good earnings and strong commodity prices.
While Pottier says he agrees that the scenes of chaos and brazen criminality that dominated the media were very alarming, he adds that investors would be shooting themselves in the foot if they disrupted their savings and investment plans in response.
Pottier said the worst affected sectors on the local bourse were the SA listed property and financial sectors, which posted losses of 4.89% and 4.17%, respectively.
“Listed property companies were directly affected because shopping centres, warehouses and some office spaces suffered damages at the hands of protestors.”
He added that financial companies were affected, both directly and indirectly, with insurers facing business interruption claims, and banks suffering the lasting effects of diminished business confidence on credit extension.
“It is unfortunate that these sectors face a setback just as the recovery from Covid-19 lockdowns was building momentum.”
Times such as these highlight the importance of a well-diversified balanced portfolio, says Pottier. He pointed to the 10X High Equity Index Fund, which “has a strategic allocation to JSE listed property of only 5%, with a 15% cap per property share imposed to further limit risk”.
Peace has since been restored to KZN and Gauteng, the affected provinces, where shops have reopened and rebuilding has begun.
“Market participants have observed that less than 10% of company operations were affected for less than a week, with a high likelihood of insurance payouts covering the full extent of losses. Thus, the impact on markets and earnings expectations has been negligible.”
Pottier also pointed to the once-off Business Survival payment for affected small and medium-sized businesses and the reinstated and expanded R350 Relief of Social Distress grant, announced by President Cyril Ramaphosa in his address to the nation on Sunday July 25, which should help communities and businesses rebuild.
Pottier concluded that these relief measures, combined with the unchanged Repo Rate and continued vaccination progress, should help to counteract the negative effects of the civil unrest and aid South Africa’s economic recovery.
The content herein is provided as general information. It is not intended as nor does it constitute financial, tax, legal, investment, or other advice. 10X Investments is an authorised FSP.
