South African equities managed to eke out a 0.3% rand total return in the month but the currency lost ground against the US dollar, depreciating by 3.8%. This meant that global equities outperformed local equities in common currency terms in the month, despite being down in US dollar terms.
During the month, local bonds sold off, declining 1.6% as the rand weakened. Within the equity market the familiar theme of resource sector under performance continued. Sasol and mining shares led the resources index down 4.7% in the month and, for the year as a whole, it was down 14.7%. By contrast, the industrial and financial indices managed positive returns during December and were up 16.8% and 27.3%, respectively, for 2014 as a whole.
Despite the poor returns from resources, 2014 was a good year for equities, which delivered a total return of 15.4%, better than bonds (10.1%) and cash (5.9%). However, all the out performance came during the first half of the year. During the second half of the year, bonds (6.6%) comfortably beat equities (3.2%) and cash (3.1%). Local bonds have benefited from a decline in global bond yields and from the decline in local inflation, which is likely to continue in the first half of 2015 as petrol prices continue to come down sharply.