China’s Market Rebound
Stimulus Measures: The Chinese government has initiated a stimulus, which includes cutting reserve requirements and lowering interest rates. While spending has not picked up fully, the China 50 ETF (in US dollars) has wiped out losses dating back to July 2022. Hong Kong’s Hang Seng index shows a similar trend.
Market Sentiment: Short squeezes have played a role in pushing the prices of big Chinese companies like Alibaba and Tencent higher. Despite concerns about China’s long-term investability (raised by experts like Viv Govender of Rand Swiss), Simon remains optimistic about continued growth in the medium term.
Shift in Hot Money: There’s been a notable shift away from tech stocks like Apple and Nvidia, with more capital flowing towards China in recent days. Simon discusses the potential for short-term pullbacks, but he sees this as an opportunity.
South African ETFs Performance
Top Performers: Property ETFs have outperformed, with the CSPROP, Satrix Property, and 1nvest Property ETFs gaining between 30% and 31.7% over nine months ending in September 2023.
Underperformers: ETFs linked to palladium, platinum, and tech innovation (e.g., Sygnia’s Fourth Industrial Revolution ETF and Satrix Healthcare Innovation ETF) have shown negative returns.
Outlook for South African REITs
Simon expects further growth in the property sector but at a more moderate pace than this year’s 30% returns. He highlights the potential impact of upcoming interest rate cuts, consumer spending at malls, and the demand for yield as government bond rates decrease. Some REITs, particularly those in rural and township retail spaces, are performing exceptionally well.
The market tends to move ahead of the cuts based on expectations, but technically any cut is great for cheaper debt and more consumer spending at the underlying properties, plus a lower rate for the valuations which means a higher present value.
So yes, they can keep going.
— The Finance Ghost (@FinanceGhost) October 2, 2024
The South African Rand and Global Markets
The Rand has seen fluctuations, dipping to as low as 17.02 against the US dollar and facing pressures from global events such as the Iranian attack on Israel and rising oil prices. Simon expects the Rand to strengthen and potentially break below 17, possibly reaching levels as low as 14.
Oil Prices: OPEC is grappling with maintaining production discipline. Oil prices are likely to hover around $70 per barrel, which is positive news for South African consumers in terms of petrol prices.
South African PMI and Vehicle Sales
PMI: South Africa’s PMI for September was positive, indicating slight economic expansion. The absence of load shedding and lower interest rates have contributed to the improved outlook.
Vehicle Sales: September saw better-than-average vehicle sales (44,000 units). Simon emphasizes the potential upside in companies like Combined Motor Holdings (CMH), which has started to perform after years of stagnation.
Investment Strategy in a Bull Market
September SA vehicle sales
Simon reiterates his bullish stance, noting that while there will be pullbacks (up to 10% corrections), the overall trend remains upward. He advises staying long in the market, especially in a bull phase.
Chapters
00:00 China’s Economic Resurgence
03:13 Property Market Dynamics
06:06 Currency Fluctuations and Global Impact
08:52 Oil Prices and Market Reactions
12:12 Consumer Confidence and Vehicle Sales
15:01 Market Outlook and Investment Strategies
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Thursdays are all about hard-core investing and trading with Simon Brown’s famous JSE Direct podcast. JSE Direct started life on ClassicFM in July 2008 and became a podcast in 2011. Every week Simon shares his views on the state of global economies, individual shares and events moving markets.
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JSE – The JSE is a registered trademark of the JSE Limited.
JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.
