Local property market – 4th Quarter 2021
Listed property performed exceptionally well over the quarter returning 8.4% and 36.9% for the year ending 2021. However, it is important to note the considerable base effect at play within the sector, which still has a negative 3 and 5-year annualised return. The property sector faces a systemic shift in demand amid rising online sales activity, and as more companies permanently adopt a work-from-home approach. As demand requirements for the post-pandemic era become clearer, so too should the outlook for the property sector. The GTC Real Estate Fund handily outperformed the South African listed property index for Quarter 4 of 2021 (10% vs. 8.4%). This was a strong performance for a passive, rules-based portfolio and so far, confirms that the underlying investment strategy – the risk parity approach – is working well. GTC Real Estate Portfolio As at Dec... Read More
Local property market – 3rd Quarter September 2021
The quarter saw no change in the local repo rate, which remained at an all-time low of 3.5%. However, local market jitters over future potential rate hikes have emerged once again, as investors remain concerned about global inflation and unexpectedly hawkish moves by the US Fed. The local favourable interest rate environment has been a boon to the local property sector, aiding it in its recovery from previous lows. Whilst the local property market earned +5.9% over the quarter, this sector is still severely depressed as evidenced by its negative medium-term returns of -6.8% annualised over 3 years to September. The property sector faces a systemic shift in demand amid rising online sales activity, and as more companies permanently adopt a work-from-home approach. As demand requirements for the post-pandemic era become clearer, so too should the outlook for the property... Read More
China & Tencent – 3rd Quarter September 2021
The change in Chinese regulatory policies can be seen as China’s way of re-affirming control over their market, as they essentially play ‘regulation catch-up’ after a period of significant growth in their technology sector. This has been a sustained period during which technology companies have experienced a relatively large degree of freedom. The recent regulations seem to be centred around regulating new industries and aligning the regulatory environment with China’s stated 5-year plan. The Chinese government wants people to have more children, however, a major deterrent to this is the cost of raising those children. In addition to conventional schooling, further online tutoring has become a concern for the Chinese government, as it views conventional education as a public good. The significant additional cost of private tutoring has placed a further burden on parents, an unintended consequence so far as the... Read More
Global and local equity markets – 3rd Quarter September 2021
Developed market equities (MSCI World), propelled by the 5.5% rand weakness over the quarter, outperformed both the global emerging market equities (MSCI Emerging Market) and the South African equity market (JSE Capped SWIX) in rand terms. In base currencies, all three equity markets were hard hit by the risk-off trade in September. Excluding the effect of the currency weakness, SA equities outperformed both developed and emerging market equities over the quarter. The elevated level of investment market uncertainty over the past few months can be, in part attributed to the energy crisis in Europe, China’s Evergrande contagion, global supply chain disruption (i.e. electronic chip shortages), lacklustre global economic recovery, and tightening Chinese regulation. To the extent that the Chinese regulatory changes have significantly impacted the gaming sector generally, and Tencent in particular, we experienced a meaningful ripple effect in the... Read More
Dollar – 3rd Quarter September 2021
The rand weakened some -5.5% over the quarter following the July riots and unrest in South Africa, global supply chain disruption, and surging oil prices. Over the longer term and on a simplistic basis, the South African rand seem to be close to fair value relative to the US dollar as indicated below:
Global & Local Bonds – 1st Quarter March 2021
Global bonds Global monetary policy remained very accommodative over the quarter. The FED kept interest rates unchanged while revising their growth forecast for the US economy from 4.2% to 6.5% for 2021. This is projected to be accompanied by a lower unemployment rate which is estimated to come in at 4.5%. Local bonds Volatility in the bond market remained elevated as continued global stimulus and liquidity triggered inflationary concerns over the quarter. This was further exasperated by the re-opening of global economies which is projected to release significant pent-up demand. The local bond index fell 1.7% as longer-dated SA rates tracked higher global yields. The SARB kept interest rates unchanged given benign inflation while the model projected two 25 basis point hikes to come in 2021. While CPI remained at the lower end of the SARB’s target range, it is... Read More
The Rand – 1st Quarter March 2021
The rand was mostly flat over the quarter marginally weakening 1.14% amid vaccine optimism checked by inflationary concerns. This is after the rand experienced a strong gain in the previous quarter as seen by the sharp downturn in the blue line, in the graph below (exchange rate) bringing it close to its long-term trend as indicated by the orange line. Given the uncertain economic environment that South Africa finds itself in, it is likely that the currency exchange rate will remain volatile.
Global Markets – 1st Quarter March 2021
The IMF upgraded its global growth forecast to 5.5% for 2021, while its 2022 forecast remained unchanged at 4.2%. This move was hardly surprising given the continued stimulus provided by global central banks along with a strong vaccine drive over the quarter. As developed nations are vaccinating at a faster rate than emerging nations, we do expect their economic recovery to mirror this. Economies which are highly dependent on tourism will likely continue to struggle in the face of subdued international travel. Global equities rose on improved vaccine distribution and optimism around robust economic growth to come in 2021. This prompted a further rotation into cyclicals and value stocks. In dollar terms the MSCI world index delivered 4.9% outpacing the MSCI Emerging Market index at 2.3%
Strategic & Tactical Asset Allocation – 4th Quarter December 2020
GTC, where relevant to the Fund’s mandate, use a combination of Strategic Asset Allocation (i.e. investing across asset classes in a fixed ratio over long periods of time) and Tactical Asset Allocation (considered and measured changes to asset allocation within predefined limits). The GTC Asset Allocation Committee undertakes a quarterly asset allocation review and meets more frequently depending on market dynamics.
The Rand – 4th Quarter 2021
The rand weakened (-6.2%) over the quarter, in line with the weaker global emerging market sentiment. Over the longer term and on a simplistic basis, the South African rand seems to be slightly above fair value relative to the US dollar as indicated below. USD/ZAR Monthly Exchange rate – 1 January 2000 to 31 December 2021 Global foreign exchange rates – Currencies against the US dollar, YTD change
