JSE bucks trend and ekes out a positive year to date
The JSE all share came through relatively unscathed in the quarter to end September, which was the worst for equities in four years. The all share dropped 3,32% in the third quarter. In the second it lost 0,72%, but it gained 4,85% in a firmer first quarter.
By contrast, the Dow Jones industrial average was 7,58% weaker in the third quarter.
The Dow has not had a positive quarter in 2015. It dropped 0,88% in the second and 0,26% in the first as markets positioned themselves for expected hikes in US interest rates. First set to occur in June, a rates rise did not take place in September, and there is now only a slim chance of a December hike. The first likely hike is set to happen in March 2016, which gives some markets a breather.
The JSE all share has eked out a positive 0,64% this year, despite resources plummeting 24%. The Nikkei gained 1,6% and the Paris CAC 40 — the best European performer — is up 4,2% in 2015.
For most global markets the picture looks less than rosy, amid the view that the US Fed will eventually hike. The Dow is 8,6% down in 2015 and the FTSE 100 has lost 7,6%. The volatile Shanghai Composite has shed 5,6% so far this year.
Overall the picture still looks challenging for emerging markets, noticeably on the currency side. Despite some comeback in October, the rand has depreciated 16% against the dollar this year as the greenback continues its rampant ride.
The dollar has appreciated 7,8% against the euro in 2015 and nearly 3% against the pound. It is also partly the strong dollar that is making the Fed hesitant to hike, as it dampens export growth in the US and so contributes to contracting GDP growth.
This hesitancy is linked to renewed deflationary concerns. Despite the huge stimulus pumped into global markets since 2008, US consumer inflation is struggling to reach 2%.
The weaker rand has benefited some rand hedges. SABMiller has rocketed 28% on AB InBev’s takeover bid, which values SABMiller at R900/share. Other rand hedges include Woolies, adding 25% on its Australian David Jones takeover, and Steinhoff, gaining 42% on its envisaged Frankfurt listing. Mondi is up 52%. The laggards are mainly mining stocks. Anglo American is down 46% and Kumba Iron Ore has lost 67%.