SOME CHEER BUT ALSO MUCH TO WORRY ABOUT
Markets had a good October, dispelling the perception that the month is usually bad for equities.
Equity markets globally were supported by risk-off trade following the dovish views expressed by the US Fed in September. Fed chair Janet Yellen sent a clear message that economic conditions were not conducive to rate hikes at that stage — but this view was reversed at the end of October.
It led to more volatile trade in November, but in October the JSE’s all share climbed 7,40% — mainly because industrials benefited from AB InBev’s proposed takeover of SABMiller, which has climbed 40% so far this year. There was some respite for the rand, which firmed 0,55% against the dollar in October. But for the year the local currency has lost 19,34% against the greenback. The rampant US currency has mellowed somewhat against the euro in October, but has still gained 8,8% on it in the year to date.
The JSE’s all share performance continues to be driven by a selected number of high flyers, including Brait (which was up 100% this year by the end of October) and Mondi (which has climbed 69%). Steinhoff was up by more than 40% this year by the end of October, while banking group Capitec had gained 76% in that time. However, resources remain a hapless bunch. Slower Chinese growth and the stronger dollar continues to make this sector one to avoid.
Anglo American was down 45% in the year to date by the end of October, while Anglo American Platinum had lost 28%.
It was also a month to forget for MTN, which fell 11% in October after the Nigerian regulatory authorities fined the group $5,2bn. It was down by 28% at end October.
Overall, global equity markets performed better than in a torrid September, with the Dow Jones climbing 8,47%. But by end October, the Dow was still down 0,9% in the year to date.
There are plenty of concerns, most notably the low oil prices. The price of Brent crude dropped below $45/ barrel in October, though it ended the month 2,46% up at just below $50. But it was still 13,5% below where it began the year. The FTSE lifted nearly 5% in October, but is still 3% weaker for the year. The Shanghai Composite recorded growth of 10% in October and has risen 4,5% in the year to date.