World markets faced turbulent times throughout October, with an estimated loss of $2 trillion. The month started positively, in reaction to optimistic NAFTA trade talks between the three major North American countries: US, Mexico and Canada. The Dow Jones did well as a result, with big manufacturing names such as Boeing stocks seeing increases. A staggering drop in the technology sector pushed Amazon down over 8%, with Microsoft trailing due to poor earnings figures. This caused the Nasdaq, Dow Jones and S&P 500 (with over 20% exposure to technology shares at September’s end) to decrease significantly – with the Dow dropping to its third lowest point in history. The exception was Netflix, where positive earnings led to a 10% increase in the stock price.
Japanese markets started the month well with the Nikkei reaching a 27-year high! But unfortunately the jubilation was short lived. Chinese stock markets opened the month down from September after a five-day national holiday, just as Asian stock markets were generally hard hit by plunges in the technology sector. The drop in technology shares, together with GDP results at the lowest point in over five years, was a hard knock for Chinese markets. Investor concerns seemed unmoved by Chinese political leaders indicating intentions to protect the economy from lower growth.
European markets felt the ripples extended from the US and Asian economies, but stand-out companies included French Connection, with shares rising over 40%. The International Monetary Fund listed UK public finances amongst the world’s weakest, having decreased substantially since the financial crisis in 2008. The news had a knock-on effect, stirring up Brexit concerns further and weakening the Pound. But, a downgrade in the UK housing sector had the opposite effect and buyers were tempted back in.
Locally, the JSE saw over R8 billion in outflows over October. The telecommunication industry absorbed the hit better than other industries, and avoided a drop in returns. As commodities briefly caught the attention of the global markets, the Rand lifted, only to dip again as unemployment figures were released at 27.5%. Large public sector enterprises such as the SABC have expressed concerns about facing possible retrenchments in 2019, which would add to already high levels of unemployment.
During October 2018 the FTSE/JSE All Share Index (ALSI) lost 5.76% on a total return basis, while bonds lost 1.71%. The SA Listed Property Index (SAPY) lost 1.69% in October. Cash returned 0.59%. Internationally, the MSCI World Index lost 7.34% in Dollar terms and the MSCI Emerging Markets Index ($) lost 8.70%. During the month, the Rand weakened by 4.16% against the greenback and by 1.76% against the Euro.
For the year to date index measures, the ALSI and listed property returned -9.38% and -23.48% respectively. The ALBI returned 3.02% and cash 6.00%. Internationally, the MSCI World Index disappointed offshore investors with -2.31% in Dollars.
Click here to view previous market review – September 2018