Last week Friday, 27 October 2017, American tech had an incredible day with the Nasdaq Top 100 companies adding $200 billion in market cap. Amazon, Microsoft, and Alphabet Inc. were some of the big performers. The South African ALSI had strong returns, but it may not be as healthy as it seems.
The JSE All Share Index has been performing well in 2017 gaining around 20% after a period of disappointing returns, but what does this really mean? There are top performers like Naspers (73.9%), and Richemont (44%), which have enjoyed remarkable year-to-date performances, but what has become evident is that these rand hedged companies are masking the performances of SA Inc. exposed companies. Out of the ALSI Top 40, only 11 have outperformed the Index while 29 have underperformed and almost half are negative year-to-date.
Participation in this growth is limited and should be an alarm bell regarding the health of the South African economy.
- Over the past two months, the MSCI World Index is up 3.4%: The MSCI Japan Index led the pack gaining 5% in dollar terms, the MSCI USA Index is up 3.3%, and the MSCI Europe Index returned 3.1%, all measured in dollars.
- On Friday, 27 October 2017, the Nasdaq Index had fantastic returns – Amazon’s quarterly results were up 13.2%, their retail subscription revenue climbed 59% year-on-year. Google’s parent rose by 4.2%, Snap 7.3%, Intel 7.4%, Apple 3% and Microsoft 6.4%. The Nasdaq itself was up 2.2%, comparatively the Dow Jones Industrial Average gained 0.1%.
- Catalonian Ministers have been detained in Spain, the leader of the Catalonian government Carles Puigdemont (removed last week) has retreated to Belgium where he was issued with an EU arrest warrant after he did not show up for his court hearing in Madrid.
- Donald Trump has announced his preferred candid for Fed Chair as Jerome Powell who is likely to take over from Janet Yellen in February next year. For more information, follow this link.
- In Europe, the European Central Bank (ECB) kept interest rates on hold. The aim of this is to ensure that inflation continues to climb higher in the European Union. Additionally, quantitative easing will be tapered in 2018 – this shows the ECB’s confidence in the state of the European economy.
- Year-to-date the All Share Index (ALSI) is up 18.2%. The Top 40 Index gained 7.6% in July and 5.9% in October – just missing these two months would have excluded investors from 13.95% of the year’s growth.
- Last week, the rand fell by 3% from R13.68 to R14.09. British American Tobacco, Naspers and Richemont (three big rand hedged shares) increased by 6.2%, 5.2%, and 4.9%, respectively.
- The All Bond Index fell 1.6% last week as bond yields shot up, so the All Bond Index return in 2017 is now a modest 5%.
Source: Dynasty, Stanlib, Prescient, Moneyweb, fin24, biznews, Daily Maverick and Bloomberg Markets etc