Global equities rallied in September led by Japanese companies posting solid earnings. Europe and the US cut interest rates to help stimulate their respective economies on weaker than expected data. The MSCI World Index gained 2,13% and the MSCI EM Index gained 1,91%. Local indices struggled with the ALSI returning -0,79%. Cash was one of the better performing asset classes during the month. The SARB did not follow the Feds path by cutting interest rates but rather allowed the interest rate differential to widen. This makes SA bonds more attractive to foreign investors; however, despite the increase in yield, foreign investors were net sellers of SA bonds – an indication that the risk premium is not sufficient. For local investors, SA government bonds remain the most attractive asset class due to the real returns being generated in an extremely tough environment.

The US dollar depreciated over 3% to the South African rand during the month of June. The sell off in the US dollar was owed to dovish comments by the Fed and positive developments in the US China trade war at the G20 Summit. Global stocks performed well with the MSCI World and Emerging Market indices gaining over 6% for the month. Locally the ALSI gained 4,59% for the month with the re sou rces sector gaining over 10%. The industrial and financial sectors had more modest returns of 3,76% and 1,29% respectively. Due to th e ongoing concerns of global growth slowdown and low US interest rates, gold gained 8% for the month on safe haven buying.

With South African SOEs applying for additional funding to avoid going bankrupt, yields on government debt are expected to rise. This has been a huge concern for foreign investors and a significant contributor to outflows in the bond market.