Monthly Market Commentary – October 2021
Global risk assets drove performance in rands for South African (SA) investors over the month. The rand did weaken slightly but overall returns from global equity and global property were produced mainly in hard currency. US markets continued to perform well with strong earnings results keeping global stock markets buoyant. SA Equity and emerging market equities, in general, lagged developed equities. SA property was the worst-performing asset class followed by local bonds as investors factored in the likelihood of global central banks reducing stimulus and raising interest rates pushing global bond yields up.
SA Inflation| Importance – High
SA inflation edged higher to 5% in September from 4.9% in August. This is the fifth consecutive month of the inflation figure coming in higher than the mid-point of the inflation target. Although inflation is at the upper end of the target, rates were kept on hold at the SARB MPC meeting as the economy remains fragile.
Eskom Woes | Importance – High
Eskom plunged the country into darkness as rolling blackouts are escalated to stage 4 just prior to municipal elections. Lack of maintenance resulting in breakdowns cripples the state-owned utility and poses a risk to economic growth in the country.
Mining Deals | Importance – Medium
Lots of activity in the SA mining industry as Sibanye Stillwater announce two significant transactions in Brazil, and a third in Australia. While the proposed buyout of Royal Bafokeng Platinum by Impala Platinum is likely to be one of the largest domestic mining takeovers since the Lonmin-Sibanye deal in 2019.
ABSA and Sanlam Deal | Importance – Medium
Sanlam, Africa’s largest non-banking financial services group, and Absa, one of Africa’s largest diversified financial services groups announced that they have reached an agreement to combine their investment management businesses in a transaction that will result in an asset management company with assets under management, administration, and advice in excess of R1 trillion.
Asset Class Total Returns – ZAR
Energy Prices Continue to Rise | Importance – High
OPEC resisted calls to increase production raising oil prices above $80. In Europe natural gas prices in the futures market continued to soar until Russia’s president, Vladimir Putin, said that Russia stands ready to increase supply, stabilizing the market. A coal shortage in Asia dragged on despite pledges of increased production from three major coal producing provinces in China.
Earnings Beats in the US | Importance – High
A global shortage of natural gas supplies continued to worry markets. Surging energy prices have pushed up inflationary pressures at a time when supply bottlenecks clog the system. Fears of stagflation have surfaced in the wake of price rises and Covid risks.
US Growth | Importance – High
The first US GDP growth estimate for Q3 came in at 2% and was softer than the expected 2.7% quarter on quarter. Labour market data were mixed, unemployment fell to 4.8% in September (from 5.2% in August), but only 194,000 jobs were added to the economy in September, much lower than the 500,000 that the market expected.
Tesla shoots above $1 trn market cap | Importance – Medium
Tesla became the first carmaker to pass a stockmarket value of $1 trillion after Hertz placed an order for 100,000 of its vehicles as part of its drive to electrify its rental fleet. Elon Musk’s net fortune alone is now worth more than ExxonMobil’s market value.
Minimum Corporation Tax | Importance – Medium
136 countries agreed to a minimum corporation tax rate of 15%, effective from 2023, for companies with global sales of over €20 billion a year and profit margins above 10%. The Irish government, which had initially opposed the deal, said it would increase its tax rate from 12.5% to 15% for firms with a turnover of more than €750 million.
Asset Class Total Returns – USD
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