Wake me up when September ends

Waking up on the 1st of October to a rain-soaked Joburg, the rumbling sounds of an overnight Highveld thunderstorm starting in the early hours of the morning, and fresh from President Ramaphosa’s announcement of a move to Level 1, we can be forgiven for starting the month off with a bit of a ‘spring’ in our collective steps!

As the lyrics of Green Day’s iconic song go, “The innocent can never last, wake me up when September ends”, September 2021 was the first month in a while of heightened market volatility. Principally driven by the risk of higher, more-stubborn inflation in the US and the near-collapse of China’s second largest property development company, Evergrande, both stoking fears of market contagion and the possible effects on commodity prices and demand for resources from the East.

Evergrande carries an immense amount of debt on their balance sheet – debt they have raised by borrowing money to fund ever-expanding housing developments across China. But when a company or a country, much like an individual, cannot repay their debts when these fall due, chaos ensues and uncertainty reigns. The Chinese government have already stepped in to restructure the company, bringing some calm to the markets and allaying fears of a possible collapse.

As an emerging market peer, much of what transpires in both the Chinese economy and market is bound to have an impact on our own domestic market – most notably on our currency. But with South Africa continuing to post record trade surplus figures (something we have not managed for almost two decades), driven by the demand for our main exports (resources and precious metals), the sell-off seen locally was muted in comparison to China, other emerging markets, and even against global developed markets.

Locally, focus is shifting to our local government elections next month, with much skepticism of the timing of elections posing the risks of starting the fourth wave so soon after we emerged from the third… certainly with outdoor gatherings of up to 2,000 people now permitted, parties can hope for bigger crowds at campaign rallies.

Hopefully the freshness of Spring along with less dust in the air and plenty more colourful blossoms on the trees, herald in the new season of not only warmer and wetter weather, but also calm and stability as we approach the end of what has been another tumultuous year.

Steve Crouse
Chief Investment Officer and Senior Advisor