The global markets have shown signs of increased stabilization in September. The global economic freefall that began with the collapse of Lehman Brothers in September 2008 has been restrained by the coordinated intervention of policymakers across the globe. While better than expected economic data and corporate earnings in September helped lift indices to new highs for the year, trading conditions remain volatile, as market participants reassessed the sustainability of the economic recovery and the prospect of earnings growth. Growing optimism about the economy prompted investors to sell the US dollar, the so called safe-haven, and snap up riskier assets and commodities. In September, foreign investors purchased a net R2,92 billion in local equities. This activity, coupled to US Dollar weakness, helped drive the rand to a new thirteen month high. The rand at these levels is now too strong to allow SA's export sector to take advantage of the subdued global recovery. The broader JSE fell 0,07% for the month, however the gold miners and industrials outperformed resources and financials. The gold mining index added 4,09% on the back of the gold price rising 5,92%. Financial markets are improving and capital markets are functioning closer to normality, however the pace of the recovery is likely to be slow going forward. The funds relative performance improved on the back of the underlying stock picks starting to come through. The underweight equity exposure is being addressed and we aim to be at full weight by end of October. Our conservative stance was not conducive to the funds relative performance over the past 6 months but the flow of positive info made us more confident to add specific stocks to our portfolio and increase the equity exposure.

The FED and Treasuries are throwing everything at their disposal to unlock the credit market. In the near term it looks as if there is glimmer of hope in the strategy. At the domestic front, the decision by the reserve bank to have an interim rate cut by 100 basis points was in line with the global trend. This helped to support the market in volatile conditions. The main question that prevails is whether this is the turn around and the start of a bull market or whether this is just a rally in a bear market. Economic data suggest that the frequency and intensity of bad news are dissipating and any form of no or neutral news is seen as encouraging. This however needs to follow through to company earnings and the next quarter results are due soon. The Sasfin funds are structured in a defensive mode on stock picking and asset allocation to benefit from the volatility swings.

It is widely speculated that the only best thing about 2008, is arguably that it's over. It was a challenging period for most fund managers and to predict that the end is in sight would be risky speech, most likely one of Bernie Madoff statements. However, even in bear markets you have relief rallies that give the portfolio some breathing space, before the next onslaught? To forecast a next onslaught would be just as irresponsible as to predict a full on recovery. We are certainly experiencing increased risk on all fronts and we are adjusting the portfolio as the opportunities and challenges arise in the market. We had some substantial outflows in the Sasfin Balanced for the month of December and had to make some asset allocation exposure adjustments. We bought Preference shares for the Balanced fund with the expectation of further future interest rate cuts. Our view is however that we are already in a relief rally but whether it is sustainable is too early to predict.