September 2018 market overview

The US economy enjoyed relief from subdued trade disputes, which served to increase investor optimism. While the United States followed through with $200 billion in new tariffs initiated in August, negotiations neutralised after China responded in turn with a 10% tariff on imports. US technology and mining sectors came under scrutiny midmonth but Apple’s latest product campaign created bigger ripples in the media than the stock market. The same could not be said for Tesla stocks, which dropped over 10% after the SEC’s accusation of securities fraud against Elon Musk.

Asian markets did poorly at the end of the third quarter overall. While Indonesia’s JSX lost 4% in the month’s first week, India’s BSE dropped over 6% by month end – its lowest point since 2008. But, the Yen’s stable exchange rate to the Dollar aided Japanese markets and China has reassured traders that it is open for business. The MSCI is also making moves to increase Chinese equities in index weightings.

UK markets dropped initially as manufacturing figures came in at their lowest point in two years, and the Pound declined against the Dollar as cabinet divisions over Brexit conversations came to light. The Salzburg Summit talks between the UK and EU leaders turned sour, and the Pound weakened again against the Dollar again.  However, the two-year bid for SKY broadcasting company was won by Comcast, resulting in an 8% increase in share prices and creating a silver-lining against the more ominous Brexit and Budget talk background. Similarly, EU investors faced a horizon darkened by Italy and Greece’s debt deficit targets, two of the largest contributors to debt in the Eurozone.

Locally, SA markets were weakened by generally low performing emerging market sentiments. Nevertheless, the Rand responded positively to the Government’s announcement of a R43 billion stimulus package aimed at growing and empowering SMEs. Investors’ optimism increased further after President Ramaphosa introduced an advisory panel for land expropriation without compensation along with a pending review on exporting costs aimed at increasing trade.

During September 2018 the FTSE/JSE All Share Index (ALSI) lost 4.17% on a total return basis, while bonds gained 0.3%. The SA Listed Property Index (SAPY) lost 2.6% in September. Cash returned 0.57%. Internationally, the MSCI World Index gained 0.56% in Dollar terms and the MSCI Emerging Markets Index ($) lost 0.54%. This September the Rand increased by 3.53% against the greenback and appreciated 3.71% against the Euro.

For the year to date index measures, the ALSI and listed property returned -3.84% and -22.16% respectively. The ALBI returned 4.81% and cash 5.37%. Internationally, the MSCI World Index rewarded offshore investors with 5.43% in Dollars.

Click here to view previous Market review – August 2018