YOUR INVESTMENTS IN Q3 OF 2021

Local and global investment markets had positive returns during July and August 2021 which reversed in September 2021. The MSCI World Index (USD) returned +0.7% in July and +2.5% in August. The return in September was down -4.2%. This meant that for the full third quarter, the return was -0.01%.

There was volatility in the market in the third quarter due to:

Fears and uncertainty about the effects of the Delta variant of Covid-19 Covid-19 and the highly transmissible Delta variant continued to drive uncertainty over the quarter. South Africa moved to adjusted alert Level 1 on 30 September. This marked the end of the third wave and relaxed the previous restrictions on movement and trade.
An increased risk of global inflation Global inflation continues to remain elevated. The US recorded year on year inflation of 5.3% in August. This was the largest year on year increase since September 2008. South Africa recorded inflation of 4.9% year on year.

Oil prices have risen to above $80 a barrel for the first time in three years, up +50% since the beginning of the year.
Central banks likely to increase interest rates sooner Elevated levels of inflation may lead to an increase in interest rates. South African interest rates are projected to increase in Q1 of 2022.
Concerns about China’s property debt crisis and changes in tech legislation China has tightened controls of its big tech companies, aiming to better align corporates with their national social goals.

At the end of September, there was a liquidity crisis at China’s second largest property developer Evergrande. Reports emerged that the property developer defaulted on two interest payments caused investors to ask questions about the health of the Chinese economy.

Q3 was volatile for South Africa share markets, with the Commodity sector impacted the most. The FTSE/JSE Resources 10 Index ended September with a return of -3.8% for the quarter.

The regulatory changes for Chinese tech companies impacted South African shares Naspers and Prosus which resulted in the FTSE/JSE All Share Index earning -3.1% in September.

A positive was that South Africa’s economy (GDP) grew by 1.3% quarter on quarter, which was higher than the expected 0.7% growth. The South African Reserve Bank kept interest rates unchanged but highlighted that there is a risk of increased inflation.