It was a decent month for all the funds with a global risk on trade supporting performance across most asset classes.
 
Global equity markets delivered decent returns during October, driven by continued accommodative monetary policy from central banks and concerns around trade issues easing slightly.

 Stand out market points:

  • All major global equity markets ended the month with strong returns, with emerging markets outperforming developed markets over the month. 
  • The South African equity market delivered decent returns over the month, largely driven by strong performance from gold and platinum counters. 
  • As expected, the US Federal Reserve announced a 0.25% interest rate cut towards the end of October, however, Fed Chair Jerome Powell indicated that moves to lower interest rates could be nearing a pause. 
  • Concerns around South Africa’s fiscal position were highlighted by Finance Minister Tito Mboweni in the Medium Term Budget Policy Statement (MTBPS). Markets reacted negatively to the news of an expected tax revenue shortfall in 2019/2020 of around R53bn, continued financial support for SOE’s and rising government debt levels, which are expected to reach around 70% of GDP within the next 3 years.
  • Moody’s provided an update on South Africa’s sovereign credit rating, maintaining the rating on the lowest level of investment grade, but changing the outlook from stable to negative, following the update on the country’s finances provided in the MTBPS.

Below please find a few key points with regards to markets and some of your underlying managers for October:

  • Local equities (+3%) delivered strong performance in the month in line with other emerging markets, driven higher by strong performance from resources counters including Anglo American Platinum (+24%), Anglogold Ashanti (+16%), Anglo American PLC (+10%), Impala Platinum (+9%) and Sasol (+8%).        
  • Resources (+7%) and Financials (+4%) delivered strong returns during the month, while Industrials (+0%) were largely flat. The industrials index was weighed down by poor performance from index heavyweights Anheuser-Busch InBev (-16%) and Naspers (-7%).  
  • Listed property (+2%) delivered a decent return for the month, as investors took advantage of the attractive initial yields on offer. 
  • Local bonds (-0%) gave up some of its year-to-date gains, as yields moved higher (moving bond prices lower) in the last two days of the month in reaction to the MTBPS.       
  • Developed market equities delivered decent returns during the month, following continued accommodative monetary policy from central banks and receding concerns around trade. The MSCI World Index delivered a return of +3% for the month. Emerging market equities bucked a recent trend of underperformance against developed markets, delivering strong returns during the month. The MSCI Emerging Markets Index delivered a return of +4% for the month.

From a portfolio perspective, most portfolios with decent allocations to local and global equities delivered strong returns for the month, while those with an income focus managed to deliver positive performance despite SA government bond yields spiking (moving prices lower) post the disappointing MTBPS.

Looking at key managers’ exposure and performance for the month:

  • Managers with significant allocations to SA government bonds underperformed peers (Nedgroup Core Bond).
  • Managers with significant allocations to resources outperformed peers (Fairtree, Methodical and CoreShares).
  • Managers with a significant allocation to emerging market equities outperformed peers (Coronation GEM).

*All data is sourced from Morningstar Direct as at 31/10/2019. The performance of South African asset classes is quoted in rands and the performance of global asset classes is quoted in US dollars.