Global markets were very strong in September. The JSE gained around 8%, rising consistently week by week while US stock markets experienced their best September in 71 years (S&P +9%).
Markets were driven by news surrounding further stimulus measures, making risk assets relatively more attractive compared with returns received on cash.

Investors in the developed world, faced with low-for-longer interest rates, continue to look for extra returns from emerging markets and commodities, pushing various commodity prices to new highs. On the JSE we have seen a flood of cash flow in to our international heavyweights with a great exposure to emerging markets. The Industrial Index outperformed (+8%) supported largely by Richemont (+19.50%) and SAB (+8.02%). In the year-to-date, foreigners have been net buyers of R69bn worth of local bonds. The flood of foreign capital could continue unabated, keeping the Rand strong for a while.

The strong Rand continues to hurt local gold mining companies, regardless of the gold price hitting all time highs. The Gold Mining Index gained just over 1% during September.

Lower than expected domestic inflation, partly a result of a strengthening Rand, coupled with slowing global economic growth gave the Reserve Bank's Monetary Policy Committee room to reduce the repo rate to 6% with the prime rate falling to 9.5%, the lowest in 30 years.
While the rate cut gave more or less an immediate relief to existing borrowers, it is unlikely to give the economy a boost in the short term. Demand for credit from businesses and households remains depressed, and banks' lending criteria remain tight.

Local and global equities continue to move up and down on the back of mixed news filtering through the market. From the beginning of June The JSE All Share Index is currently up around 2%. The industrial sector underperformed falling over 4%, largely dragged down by Naspers (-13.74%). Naspers fell sharply following news over China's ban of the use of Tencent's virtual currency, QQ, by minors. Management believe the market's perception of the effect on Tencent, a major holding, was exaggerated. The share subsequently recovered on encouraging annual results. Gold mining outperformed as investors sought safety in bullion in the uncertain environment. Harmony was the star performer on the mining board, climbing 5.6% for the month. In the US Ben Bernanke was fairly upbeat and said it was unlikely that the US would suffer a double-dip recession. However, worse than expected jobs data out of the US dented consumer sentiment. In a testimony before Congress, Fed Chairman Bernanke said the US economy was recovering, but was vulnerable to a setback. In the minutes that followed, the Federal Reserve marginally downgraded its forecast on growth. Economies are still very fragile as the foundations that the recovery was built on are not very solid. Based on this we are seeing calls from the US delegates to maintain stimulus to ensure that the recovery gains traction. In Europe Jean Claude Trichet said the recovery was stronger than previously thought. However the big European countries - France, Germany, and the UK have announced tax increases, spending cuts, or both, in an attempt close budget deficits, following the lead of the more peripheral economies of Ireland, Latvia and Greece. The leaders of the G20 nations meeting in South Korea during June agreed that "countries with serious fiscal challenges need to accelerate the pace of consolidation." Germany's government announced it would cut €80bn in spending by 2014. As money moved out of equities and into bonds, the S&P500 index, which tracks the performance of the 500 biggest US companies, fell 12% in the second quarter of 2010. Again we have seen a degree of panic in global markets with the 2 major "risk free" assets doing well - i.e. gold and US Treasuries, while global shares, oil and the euro have fallen back.

During March global markets ended significantly higher on the back of a recovery in corporate profits and positive economic news. Following February's dip, the S&P500 gained 6% while the JSE All Share index rose 7%. Resources led the JSE's climb, the index adding 10%, with platinum shares featuring prominently. Gold shares, though, lagged the rest of the mining boards. Industrials and financials were firm with foreigners showing a keen interest in retail stocks.
The big news was the Monetary Policy Committee's surprise announcement of a 50 basis point cut in the repo rate, reducing it to 6.5% and taking the prime lending rate down to 10%. Government had extended the Reserve Bank's mandate to include fostering growth, which, together with better inflation data, enabled the MPC to move rates lower. The cut in rates should ease the impact of higher electricity and petrol costs on consumers and businesses in the months ahead. Good news was the National Treasury and SARS announcement that tax collection for the fiscal year 2010 was R8.1bn more than estimates. The revised number is projected to ease the projected budget deficit to 6.8% of GDP from 7.3% which could reduce the net issuance of government bonds and help stabilise rates. Still, our yields remain attractive to offshore investors.
Uncertainty over Greece's high level of borrowings continued to trouble investors and caused increased volatility in currency markets. A euro-region and IMF package agreed in early April finally eased fears although the harsh austerity package demanded by the loan's backers was expected to rile the nation's trade unions and government employees. Despite worries over sovereign solvency, fragile banking systems and below-average growth prospects in the developed world, investors drew comfort from improving fundamentals in emerging markets and beliefs that the world economy was, at long last, resurfacing from the hardships of the financial crisis. All the major world stock market indices reached new multi-month highs as investors grew in confidence and took on further risks.
On the JSE the upward momentum on the market remains intact even though shares prices appear stretched and multiples high. Sellers seem scarce.

Despite turmoil in the global financial markets, the JSE All Share Index climbed 27% for the year driven largely by the belief that the worst of the economic crisis had passed and global economies would return to growth, albeit at a slower pace. Resources outperformed financials and industrials rising 27% on the back of a sharp recovery in metal prices. The oil price rose 81% and platinum increased by 57%. On the mining board the top performer was Kumba Iron Ore increasing by 85%. The industrial sector showed signs of improving late in the year with pick ups in manufacturing and mining, but sagging retail sales and high levels of unemployment remained a concern. Despite these factors consumer stocks recovered. Top performers on the industrial board over the year were Naspers (+83%) and Richemont (+46%).

The financial markets lagged, dragged down by worries of growing bad debt levels, increasing insolvencies and difficult trading conditions. Banks performed reasonably well with Investec (+31%) and Nedbank (+31%) outperforming the Financial Index. Old Mutual gained 70% as investors grew comfortable that the company would not be sunk by its exposure to the US debt market. A big worry has been the strength of the rand. Improving fundamentals including economic growth, corporate earnings and credit conditions increased investors' appetite for riskier assets, driving funds out of the dollar into higher yielding emerging market currencies. The strength of the rand reduced South African competitiveness, particularly in the exporting and manufacturing sectors. 2009 ended with strong indications that the global economy was emerging from the recession and with interest rates likely to remain low for longer, equities should continue to be an attractive investment vehicle in 2010.

In December the TwentyTen Fund rose nearly 5%, outperforming the general market but the absence of exposure to resource stocks left the portfolio lagging the broad All Share Index. Still the fund advanced 18.5%, a credible performance in difficult economic circumstances. With the business outlook improving, the fund is well positioned to benefit from South Africa's social and investment projects and commercial expansion on the African continent.