GTC EB Trendline – September 2015
“In every crisis there is opportunity” – Chinese proverb
This past quarter has been a tumultuous and extremely volatile one for global stock markets driven largely by uncertainties over a potential increase in interest rates in the United States and a deteriorating Chinese economy with all its implications for global growth.
Where to, Interest Rates?
Extreme volatility was a feature of the local market over the quarter and although the JSE/ALSI managed to close September having gained 0.23% over the previous month it traded for the better part of the month in negative territory.
In July, despite a lower than expected CPI figure and a lacklustre economy, the S.A. Reserve Bank somewhat unexpectedly raised the repo rate from 5.75% to 6.0%, the first rate increase since July 2014. Despite the National Energy Regulator (NERSA) rejecting Eskom’s request for an additional tariff hike and the sharp decline in the oil price, the SARB Governor Lesetja Kganyago felt it expedient to introduce the rate hike in anticipation of the U.S. Federal Reserve raising interest rates at its September meeting. Had SARB not increased rates the possibility of substantial foreign currency outflows from the local stock market may have resulted.
