August was a tale of two halves, starting on a negative note with the Bloomberg World Index  dropping 6.5% in the first few days. One of the catalysts for the negative sentiment was a surprise Bank of Japan (BoJ) rate hike. This caused an unwind of the YEN carry trade. This had been predicated on a weak Yen and relatively low Japanese interest rates and had supported large amounts of Japanese capital moving offshore into foreign equity markets. As interest rates went up and the Yen strengthened this trade reversed with capital hence flowing out of foreign equity markets. The technology sector in particular was impacted, which fell 10% at the start of the month. At the same time weaker-than-expected employment numbers sparked fears of a US recession. However, the rise in unemployment figures is partly due to an increased participation ratio as more people move from ‘not working and not looking’ to ‘actively looking’ and employment growth was positive. The BoJ calmed markets by saying that it won’t increase interest rates while financial and capital markets are unstable, after which markets gradually started to recover and ended on a positive note when the US Bureau of Economic Analysis (BEA) revised US GDP growth higher from 2.8% to 3% for Q2. Overall, the Bloomberg World Index gained 2.5%, while the Ashburton Global Leaders Fund (I Class USD) was 1.7%.

Hannover shares were up 14.1% reporting second quarter earnings which were 13% ahead of consensus expectations and the company looks set to produce a strong set of results for the full year. AstraZeneca was up 10.5% gradually increasing in August after announcing in July that the company now expects top line growth to increase mid-teens percentages up from a low double-digit percentage in 2024.  PayPal shares were up 10.1% after seeing analysts upgrades in the month as the company seems to be executing well on key strategic initiatives.

Both oil services companies owned in the Global Leaders Fund had a difficult month with Halliburton and Schlumberger down 10.4% and 8.9%, respectively. These companies are seeing strong international demand for crude drilling, however US shale activity has been slowing. Overall, sentiment around the oil and gas sector has weakened due to US recession fears and potential oversupply in 2025. However, as reiterated by these companies on their earnings calls, there is still a long tailwind of growth opportunities within the sector.

VW shares were down 8.9%, although the full position in the company was sold out of the Fund at the start of the month. The company trades at an attractive forward price to earnings and pays a decent dividend. However, we believe import duties imposed on China by Europe are not positive for the company, due to their production facilities in China and therefore the risk to subsidies which they receive there. In addition, we think it will be very difficult for VW to effectively compete with Chinese electric vehicle makers which are able to manufacture these cars for considerably cheaper.  

Looking ahead, September is likely to bring the first US rate cut as US Federal Reserve Chair, Jerome Powell said ‘The time has come for policy to adjust’ at the recent Jackson Hole Economic Symposium. Looser monetary policy should alleviate some concerns around a US recession and Powell’s comments reflect confidence that inflation is now contained with the focus of the committee shifting to supporting the labour market.

Disclaimer:

Waystone Management Company (Lux) S.A. is regulated by the Commission de Surveillance du Secteur Financier (CSSF) (ref A00000395 & S00000734), Waystone Management Company (Lux) S.A. is a company located in Luxembourg, L-1273 Luxembourg at 19, Rue de Bitbourg. This document is Issued by Ashburton Fund Managers (Pty) Limited (The Investment Manager) (Reg number 2002/013187/07),which has its registered office at 3 Merchant Place, 1 Fredman Drive, Sandton, 2196, South Africa and is an authorised financial services provider (FSP number 40169), registered with the Financial Sector Conduct Authority (FSCA). The funds are authorised in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier (CSSF).In South Africa, the Fund(s) is/are approved for promotion under section 65 of the Collective Investment Schemes Control Act 2002. The Fund Prospectus, and further information including pricing and changes, may be viewed at the Fund’s representative office in South Africa: Ashburton Management Company (RF) Proprietary Limited (“Ashburton CIS”), of the same address. Ashburton CIS is an approved collective investment schemes manager regulated by the Financial Sector Conduct Authority and a full member of the Association of Saving and Investments South Africa. In the event a potential investor requires material risks disclosures for the foreign securities included in a portfolio, the manager will upon request provide such potential investor with a document, outlining potential constraints on liquidity & repatriation of funds; Macroeconomics risk; Political risk; Foreign Exchange risk; Tax risk; Settlement risk; and Potential limitations on the availability of market information. The value of participatory interests and the income from them may go down as well as up and is not guaranteed. Past performance is not necessarily a guide to the future performance. Where an investment involves exposure to a currency other than that in which it is denominated, changes in rates of exchange may cause the value of the investment to go up or down. CIS portfolios are traded at ruling prices and can engage in borrowing and scrip lending. A full detailed schedule of fees, charges and commissions is available from Ashburton on request and incentives may be paid and if so, would be included in the overall costs. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The manager has a right to close the portfolio to new investors in order to manage the portfolio more efficiently in accordance with its mandate. This document does not constitute an offer or solicitation to any person in any jurisdiction in which Ashburton Fund Managers (Pty) Limited is not authorised or permitted to communicate with potential investors, or to anyone who would be an unlawful recipient. The original recipient is solely responsible for any actions in further distribution of this document and should be satisfied in doing so that there is no breach of local legislation or regulations. This is a marketing communication. The Management company has the right to terminate the arrangements made for Marketing. Additional information about this product, including brochures, prices,  application forms, Prospectus, KIID and annual or half-yearly reports, can be obtained from the Manager, free of charge, and from the website: www.ashburtoninvestments.com