December 2017 market overview

December was another eventful month on the financial calendar and the year 2017 did not go down quietly. An important driver of global markets’ strong growth in recent months has been the expectation of the implementation of President Trump’s tax reform. On 19 December the US tax bill, which will cut corporate taxes to growth-friendly levels and temporarily lower individual taxes, was approved by the Senate. Subsequently, the Dow Jones set a new record at 24 837.51.

Cryptocurrencies remained a popular theme among investors and non-investors alike as bitcoin hit a new all-time high of $19,783.06. By 17 December the price of one bitcoin was up 1 824% since the start of this year. During the month a US regulator also opened the door for bitcoin futures to trade on major exchanges that will offer contracts for futures of the virtual currency, rather than the trading of the currency itself.

Locally, it was never going to be a dull month with the African National Congress (ANC) selecting its new Top Six leadership on 18 December. Markets and particularly the rand responded positively to the victory of Cyril Ramphosa. In a close contest with Nkosazana Dlamini-Zuma, Ramaphosa succeeded President Jacob Zuma as the new leader of the ANC.

On the stock market, South Africans were in for an unwelcome surprise as three local companies encountered controversy impacting their share prices early in the month. The CEO of Steinhoff International, Markus Jooste, resigned amid accounting irregularities and the share price plummeted by more than 90%. Naspers became embroiled in accusations that its subsidiary MultiChoice paid Gupta-owned ANN7 and the SABC an unusually large sum of money, and EOH lost a third of its share value due to the forced sale of shares by financial institutions against equity financed transactions.

During December the FTSE/JSE All Share Index (ALSI) declined 0.3% on a total return basis, while the SA Listed Property Index (SAPY) grew by 4.2%. Bonds recovered after the November sell-off with the All Bond Index (ALBI) gaining a strong 5.7%. Cash returned 0.60. Internationally, the MSCI World Index gained 1.4% in dollar terms and the MSCI Emerging Markets Index ($) delivered 3.5. For South African investors who measure their returns in rand, the spectacular 10.2% strengthening of the rand against the dollar more than cancelled out this month’s return on offshore assets.

For the calendar year of 2017, the ALSI and listed property returned 21% and 17.2% respectively. The ALBI returned 10.2% and cash 7.5%. All major indices comfortably outperformed inflation (latest available figure: 4.6% year-on-year to end of November.) Internationally, the MSCI World Index and the MSCI Emerging Markets Index ($) rewarded offshore investors richly with dollar returns of 22.4 and 37.4% respectively. The rand appreciated by 10.5% against the US dollar and by 1.15 against the British pound.