(by Group Advisory Services, Stanlib)
- September was a great month for markets, with the JSE gaining 8.7% (15.2% in dollars), while the MSCI World Index gained 9.4% and the MSCI Emerging Markets Index gained 11.1%, both in dollars. With the rand gaining 5.9% in September against the dollar, these two returns were 3.4% and 5.1% respectively in rand terms.
- The rand also gained 3.6% against the pound, but lost 1.3% against the euro, one of our big trading partners.
- The ALSI returned 13.3% over the quarter to end September (24.2% in dollars).
- Although bonds have done very well (up 14.1% YTD), both the JSE Industrial Index (up 18.2%) and the Financial Index (up 16.7%) have beaten bonds, while the Resources Index (-3.6%) has struggled. Cash has done 5.3% YTD.
- Foreign investors have taken some profits lately, with a total of R8.9bn net flowing out of our bonds and equities over just the past 10 days, with very little impact on the rand so far.
Where to now?
- After such an impressive jump, markets could pull back a bit in October. Note that, apart from cash and residential property, almost everything is in a bull market. Copper jumped 9.5% in September to its highest price since before the Lehman Bros crash. Oil jumped 8.5%, palladium jumped 16%, silver 12%, gold 5% and platinum 8.5%.
- The point is, as Fidelity’s legendary value fund manager, Anthony Bolton said last year, slow world growth, minimal inflation and low interest rates are a good environment for equities….also for commodities and not bad for bonds either.
- BCA Research admits that economic uncertainty remains high, although in a nutshell they think we are slowly passing the soft patch; but more easing by the US is still needed.
- They note that although US consumer spending is growing slowly, in absolute dollar terms it is now at an all-time record high, as are US company profits.
- BCA’s asset allocation model has just up-weighted equities at the expense of bonds, especially Emerging Market equities.
Snippets of Info
- The Financial Times reports that the US TARP programme, whereby they lent money to besieged companies like GM, Citigroup, AIG and Bank of America, is on track to cost just $50bn, way below the $700bn original estimate. In fact, the US taxpayer may even make a profit.
- The FT reports today that 3 Brazilian and 2 Chinese banks are among the world’s top 10 credit card issuers, more evidence that banks and consumers in the emerging markets are leaving their western rivals in the shade.
- The SA leading economic indicator recorded an impressive rise of 1.1%m/m.
- Stats SA released the CPI headline inflation last week, which fell to 3.5% mainly on the strength of the Rand.
- SA PPI accelerated slightly to 7.8 percent y/y in August from 7.7 percent in July, driven mostly by mining and electricity.
- SA credit growth increased in August mainly because of a large increase in mortgage advances.
- Overall credit growth is clearly looking a little more encouraging.
- SA trade account recorded a larger than expected deficit of R4.66bn in August 2010, due to a sharp decline in mineral and metal exports
- In the US last week, personal income rose more than expected in August 2010.
- US consumer confidence fell sharply in September to 48.2, well below market expectations.
To see the full review, Read on…..