Market Commentaries

Global Markets:

Emerging markets gained another 1.1% in September with Developed markets gaining a subdued, 0.3%. Perhaps it should be no surprise that the countries in the world that continue to have normal monetary policy and normal interest rates (emerging markets) are becoming a preferred investment destination. The rally in emerging markets was initially supported by the turnaround in commodity prices earlier in the year. We are now seeing this turnaround in other emerging market sectors, as earnings more broadly are forecast to show modest growth next year.

Global Markets:

It’s astounding how much can happen in a month! The Olympics came and went. The overpaid footballers of the English Premier League kicked off their season. We had an election. Once again the MSCI Emerging Markets Index was up a further 2,3%. This emerging market rally is not a change of heart by global investors’ who now consider the growth prospects of emerging markets to be golden. No, it is a symptom of the disruption started by the global financial crisis of 2008. The number of developed market bonds that now yield a negative interest rate has risen substantially since the Brexit vote. Yes, investors are actually lending more money than ever to the German, Japanese, French and Swiss governments. In return they are promised less than they lent?!? Why would investors accept such a proposition? Well, some pension funds and insurance companies are simply obligated to invest in bonds. Some investors believe they will make a capital profit on their investment (if yields fall further). Others are looking for a return on the currency in which the bond is denominated.

Global Markets:

Within a month after the Brexit vote, global markets have shaken off the initial damage inflicted by the “remain” outcome, and resumed an upward trajectory. Most markets ended the month higher than they were just before the vote. We fear that this is more to do with the commitments made by the world’s central bankers to support any post Brexit economic slow-down, than investment fundamentals. An interesting observation is the continued strength in the performance of emerging markets in July. The MSCI World Emerging Markets Index delivered a return of 4% in June, and another 5% in July. Supporting this rally has been another step up in the recovery of commodity prices. Notwithstanding the received wisdom that commodity prices require a resurgent Chinese economy to recover, the platinum price is now up close to 30% thus far in 2016. Furthermore, the “remain” vote, which led to central banks committing to support their respective economies with liquidity, has emboldened investors to take on more risk, resulting in an increased appetite for emerging market assets.

South African Market:

June brought with it a few notable domestic developments prior to the world’s focus on the UK’s astonishing vote to leave the EU. The month started with the much anticipated announcement from S&P which affirmed South Africa’s foreign currency bond rating at one notch above sub-investment grade, or “junk” status. In its statement, S&P warned that low GDP growth and rising political tensions could still see a downgrade in its rating this year (December 2016) or next year “if policy measures do not turn the economy around”. All eyes are on our political and business leaders as they scramble to make the case for not downgrading South Africa. Most of the published analyses implies that this is essentially a fait accompli.

South African Market:

As you were! Local markets reverted to type this month as recent rallies in the Rand and Resource shares turned around, halted by local politics, S&P’s impending credit rating announcement and global economics. Industrial shares and cash were the only sources of positive returns to be found. This month’s political own goal came in the way of a report in the Sunday Times that the Hawks want Finance Minister, Pravin Gordhan to be prosecuted for “espionage”?!

South African Market:

Politics continued to dominate the local news flow in April as ratings agencies and prominent global institutions alike warned that the current political crisis is a major risk to growth. Both the IMF and the World Bank downgraded South Africa’s growth forecasts for 2016 and 2017 respectively. The IMF is now forecasting SA’s economic growth for 2016 at 0.6% from 0.7% and at 1.2% from 1.8% for 2017.

South African Market:

The wonderful thing about the political fireworks that we witnessed in March is that South Africans have been so captivated by the display, that we have had little opportunity to dwell on the Protea’s valiant (but ultimately disappointing) showing in the T20 World Cup! Slowly but surely, our democracy is holding its own and the powers that be are being held accountable for their unlawful and unconstitutional actions, as we have seen in this month’s Court of Appeal (Bashir case) and Constitutional Court (Zuma case) findings.

South African Market:

All good things come to those who wait, and if Leo could finally win an oscar, then there is hope that South Africa could avoid the dreaded downgrade after all.

South African Market:

If returning from a relaxing summer break and heading straight into a global stock market correction wasn’t sufficient to jolt us back into reality, South African’s also had to cope with the indignity of England’s Barmy Army singing about the Rand’s demise at the New Year’s Newlands Cricket Test!

South African Market:

What a month for South African investors! We had three finance ministers in four days, Fitch downgraded SA to a BBB credit rating (the lowest investment-grade rating) and Moody’s changed the outlook on SA’s credit rating to “negative” from “stable”, citing persistent low growth and a growing risk of spending targets being exceeded due to political pressure, as the main reasons behind the move.