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Market review: November 2017

| Market Forces

Internationally, eyes remain on two important factors influencing economic growth going forward: the pace of quantitative tightening in both the US and in Europe, and the likelihood of President Trump’s proposed tax reforms. The month of November kicked off with the Fed’s announcement that it’s keeping the federal funds rate unchanged. US joblessness has fallen to 4.1%, the best figure the US economy has seen since December 2000. The US tax reform bill is making its way through Congress. There are two versions of the bill, the House and the Senate version. The House and the Senate now need to meet in Congress to iron out their differences.
On the other side of the Atlantic, the Bank of England increased the benchmark rate to 0.5% from 0.25%, at the same time citing concerns that the UK economy appears fragile as the 2019 split from the EU nears.
Hong Kong’s Hang Sen ended above 30 000 for the first time in 10 years, rallying along with other Asian stocks after Wall Street hit yet another record. Also, the cryptocurrency bitcoin broke through the $11 000 mark, up almost twelvefold year to date, and deepened the divide between the pro-bitcoin camp and those calling its phenomenal rise a ‘bubble’.
Locally, good news for many citizens was Cabinet’s approval of the National Minimum Wage bill, bringing SA closer to a minimum wage of R20 an hour. SA consumer inflation also eased to 4.8% year-on-year for October. Then, on 24 November S&P Global Ratings announced that it’s downgraded SA’s local currency debt to non-investment grade and lowered SA’s foreign currency debt one notch deeper into junk. Moody’s placed the country on review for a downgrade, but is awaiting the facts from the National Budget in February.
North of the Limpopo, Zimbabwean citizens finally saw the day many thought they would never witness: the resignation of President Robert Mugabe after a 37-year reign which saw the country’s economy all but annihilated and the Zimbabwean dollar devalued until it was no longer worth the paper it was printed on. President Mnangagwa appointed a new, slightly shrunk Cabinet, which notably omitted any opposition members. Mnangagwa re-appointed ex-Finance Minister Patrick Chinamasa to the finance and economic development ministry.
The FTSE/JSE All Share Index (ALSI) returned 1.5% this month on a total return basis and the SA Listed Property Index (SAPY) gained 1.9%. Bonds continued their retreat since the MTBPS, with the All Bond Index (ALBI) losing 1%. Cash returned 0.58%. Internationally, the MSCI World Index gained 2.2% in dollar terms and the MSCI Emerging Markets Index ($) delivered a marginal 0.2% after last month’s strong gain. For South African investors who measure their returns in rand, the 3.7% strengthening of the rand against the dollar wiped out this month’s return on offshore assets.
For the year to 30 November 2017, the ALSI and listed property returned 21.4% and 12.4% respectively. The ALBI’s return of 4.3% has barely kept up with inflation this year. Internationally, the MSCI World Index and the MSCI Emerging Markets Index ($) have been extremely kind to offshore investors at 20.8% and 32.8% respectively in dollar terms.

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