MONTHLY MARKET OVERVIEW
Author: Hennie Bezuidenhout
- China devalues Yuan in an effort to allow more flexibility and increase economic competitiveness.
- Emerging markets selloff continues to dampen risk appetite, adding to the economic woes of commodity producing nations.
- South African rand reaches all time low against US dollar as foreigners sell equities and bonds.
For the month of August, South African equities lost 3.6%, reflecting the bearish sentiment global investors attached to emerging market exposure. Weak Chinese economic data and subsequent currency fixing initiatives spurred investor jitters globally, and confirmed suspicions that the second largest economy is currently struggling to meet investor expectations.
Additionally, data suggested that South Africa’s economy shrank for the first time in more than a year during the second quarter of 2015, and raises the risk that current labor disputes and the mentioned slowing Chinese demand could push the economy into recession.
On global markets, China’s Shanghai Index slumped to their worst performance since the depths of the financial crisis in 2007, and wiped out what was left of 2015’s gains, which in June stood at more than 50%. Moreover, US markets registered its biggest monthly percentage drop since May 2012, while European stock markets also collapsed during August, shedding 8.3%. Read more
Chart of the month: Spike in market volatility Index
UNPACKING THE SOURCES OF SHAREHOLDER RETURNS
Author: Cor Booysen
We seem to be living in an environment of constant crisis and uncertainty. Earlier this year it was Greece and their potential exit from the EU. Since August the market has become worried about a potential hard landing of the Chinese economy and whether or not the Fed will be making a policy mistake by raising rates too early and hence plunge the US into a recession. Next year will surely bring its own sets of crises. We have consistently seen worries and crises every year since the great recession of 2008/9.
As managers of our clients’ money we need to be careful not to get drawn too much into the sensation seeking news-flow around the concerns of the day. We need to stay focussed on what drives longer term shareholder returns, whilst keeping one eye on the direction of the overall world economy. To do this we need to stay focused on the sources of shareholder returns. Read more