Tag: SA Financial Markets

The rand: What a growing global economy can do

 In our recent asset allocation overview we had made the case for overweight equities. However our ranking order, based on our valuation exercises, indicated a preference for developed markets (represented by the S&P 500) over emerging markets generally (represented by the MSCI EM Index) over the JSE All Share Index.

The indexes this year have behaved very much in line with our ranking order. We compare the performance of the respective Indexes this year in USD below. As may be seen the S&P was the out performer and the JSE the distinct underperformer in January 2011.

Continue reading the full Daily View here: Daily View, 1 February 2011 – The rand: What a growing global economy can do

The global forces that drive SA’s Financial markets from day to day

This study demonstrates with the aid of single equation regression analysis the role global capital markets play in determining the behaviour of the Johannesburg Stock Exchange(JSE ALSI) the Rand/ US dollar exchange rate (ZAR) and long term interest rates in South Africa on a daily basis represented by the All Bond Index (ALBI) or long term government bond yields represented by the R157. It will be shown that since 2005 the state of global equity markets, represented in the study bythe MSCI Emerging Market Index (EM) has had a very powerful influence on the JSE. The EM Index is shown to have had a less powerful yet statistically significant influence on the ZAR while it is also demonstrated and that conditions in global capital markets, and the ZAR have had some weak but statistically significant influence on the direction of long term interest rates in South Africa. It will be demonstrated that movements in  policy influenced short term interest rates, have had very little predictable influence on share prices, the ZAR or long termbond yields. The causes as well as the consequences of the ineffectiveness of policy determined interest rates for monetarypolicy are further analysed.

Turbulence on the Nile – ripples elsewhere

The likely fall of an Egyptian Pharaoh, after a very long reign, added uncertainty to global markets last week. Exposure to equities was reduced and share markets retreated with most of the weakness experienced on the Friday. A weaker rand made the JSE an underperforming Emerging Market in USD. The weak rand furthermore did not spare the Resource stocks that are regarded as riskier than most. (See below)

Global Equity markets Weekly USD returns; January 23rd= 100

Source; Bloomberg and Investec Securities, Investec Wealth and Investment

 

JSE Weekly Rand returns; January 23rd= 100

Source; Bloomberg and Investec Securities, Investec Wealth and Investment

Continue reading Turbulence on the Nile – ripples elsewhere

Earnings: The trend is your friend – but which trend?

JSE All share index earnings are highly cyclical. And the cycle is one of high peaks and deep troughs in the growth rate ofearnings, as the illustration of the cycle of inflation adjusted or real earnings growth for the JSE since 1961 shows.The cycle has been particularly vicious lately. After a surge in earnings growth after 2004, which was sustained until 2008, thegrowth cycle turned very negative in 2009-2010. Real earnings at the bottom of the trough in late 2009 were some 40% lower thana year before. This represented the deepest trough in the JSE earnings cycle since 1960. Real JSE earnings growth turnedpositive again late in 2010 and consensus forecasts would have them grow by about 25% in 2011.

Continue reading today’s Daily View here: Daily View 26 January 2011

The building cycle: When a plan comes together

There are increasing signs that the global economic recovery is building momentum, and is very strong in many instances. We saw this last week with Chinese GDP numbers for the fourth quarter, which grew at an annualised 12.7%. But even in the developed world the signs are looking promising, with good business activity survey numbers out of Japan and Germany, and a promising set of jobless claims numbers out of the US last week.

Continue reading the Daily View here: Daily View 24 January 2011