MANAGING RISK NOVEMBER 2015
By most measures, a number of equity markets, including South Africa are looking stretched in value. As Investors, we have had a relatively smooth ride, with very generous returns since 2009. These above average returns are unlikely to continue for another 6 years, but we cannot know precisely what will happen to change them nor how. One common expectation the asset managers that we engage with regularly, have, is the expectation of volatility over the next 12 months. There are a number of sources of risk in these strange times, the obvious ones being the Greek debacle, Chinese asset bubbles, slow Chinese growth, the expected upward moves in interest rates this year (or will it be next year), to name a few
MARKET UPDATE NOVEMBER 2015
South African Market:
Notable themes impacting the South African market in July were the continued weakness of the Rand, as well as the ongoing rout in the resources sector which has lost 40% in the last year. Resources shares are testing the resolve of the value investors who see long term value in the sector, but are suffering underperformance whilst waiting for the sector to turn. Whilst this may well turn out to be a generational investment opportunity, it is another reminder of how difficult it can be to be a contrarian investor. The property sector and bonds returned to winning ways in June, after a few months of negative returns, although we note that bonds have still underperformed cash over the last 12 months.