The Johannesburg Stock Exchange All Share Index ended September with a total return of 1.6%. Year to date the All Share Index's total return is now 14.8%.The Rand strengthened against the Dollar by 1.0% reducing its loss for 2012 to 2.9%, after losing 21.9% in 2011. The South African All Bond Index's return in September was 0.9% thus posting a 13.1% total return year to date. Cash delivered a positive 0.4% in September and 4.2% year to date.

South African news over the past month has been dominated by the continued unrest in the mining sector which has now spread to gold, coal, iron ore, diamond mines and to other industries such as transport. The strikes are going to shave at least 1.5% off GDP growth in the second half of the year reducing South Africa's GDP growth to about 2.2% for the full year. Moody's has downgraded South Africa's local and foreign currency bonds as expected and kept it on negative watch. CPI edged up to 5.0% year on year in August from 4.9% in July. Forecasts are for inflation to peak at about 6% in early 2013. The chance of another interest rate cut is being reduced by the ever widening current account deficit which is likely to hit a peak of about 8% in the fourth quarter of 2012. Foreigners were small net sellers of equities in September and have sold a net R4.4bn year to date but continued to be big net buyers of bonds. Foreigners bought R8.6bn of bonds in September and thus a net R76.7bn year to date.

Our Strategy remains unchanged! As stated we have taken a positive stance on equities especially since Mario Draghi's "I will do whatever it takes to save the Euro speech". In our opinion this was a game changing event which removed the massive event risk, of the Euro-zone heading towards a break up, from all risky assets such as equities. We have bought equities across many sectors. We continue to remain of the view that despite short term negativity, value has emerged in some of the commodity counters, and positive news on stimulus could reverse some of the recent losses in commodity shares. We are confident that a varied spread of counters in commodity, growth and cyclical shares, such as Imperial, will deliver results by year end. We have renewed our emphasis on rand hedge shares as we believe that even when the current chaos in South Africa is over, South Africa will struggle to attract sufficient capital to plug its current of the economy more competitive. Despite continued weakening in growth forecasts in Europe and China, global growth is still in the order of 3.5% for 2013 .We remain positive on equity prospects till at least the end of 2102.

Armin Diem lives and works in Cape Town South Africa. He qualified with an Economics Honours degree from the University of Cape Town in 1986 and is a Charter holder of the US based CFA programme. He has been involved in the investment industry for over 20 years in varied capacities at institutions such as Protea Assurance, Appleton, PSG and for the past six years at Alpha Macro Fund Managers. He has launched and managed the Absolute Alpha Fund since inception in November 2003. The fund has twice been nominated as one of the best performers in the long short category at the annual Symmetry and Africa hedge fund awards.

The Johannesburg Stock Exchange All Share Index ended June with a total return of 1.9%. Year to date the All Share Index's total return is now 7.0%.The Rand strengthened against the Dollar by 2.3% reducing its taking its loss for 2012 to 0.9%, after losing 21.9% in 2011. The South African All Bond Index's return in June was 3.3% thus posting a 7.7% total return year to date. Cash delivered a positive 0.4% in June and 2.8% year to date. On the whole developed equity markets reversed their weakness of May with the likes of the S&P 500 gaining 4.0% in June. The MSCI World Index gained 4.8% (in US$ terms). Emerging markets rose by 3.4% in June (in US$ terms) and are now 2.3% higher in 2012.

Foreigners turned net buyers of SA equities in the second quarter to the value of R3.2bn and reduced the net selling of equities to R0.9bn year to date in 2012. Foreigners continued to buy SA gilts buying R27.3bn in the second quarter and thus R48.5bn year to date. SA CPI surprised on the downside in May slowing to 5.7% year on year from 6.1% in April. The SA Minister of Finance has also reduced the growth rate for 2012 to 2.5% from its earlier projection of 2.5%.

US first quarter GDP grew at an annualized rate of 1.9% down from 3.0% in the fourth quarter of 2011. Many of the recent leading economic indicators point to a further slowdown in the second and third quarters. Chinese, Indian, Brazilian and Russian growth has all slowed recently, disappointing to the downside. All of these so called BRIC countries have recently cut short term interest rates in an attempt to boost growth prospects. The Greeks voted to effectively stay in the Euro but realistic projections show that it will be almost impossible for them to keep to their commitments. Equity markets are expected to remain volatile!

The Johannesburg Stock Exchange All Share Index ended March 2.4% lower. Year to date the All Share Index is now 4.9%higher.The Rand weakened against the Dollar losing 2.4% in March taking its gains for 2012 to 5.0%, after losing 21.9% in 2011. The South African All Bond Index gained 0.1% in March posting a 2.4% return for the first quarter. Cash delivered a positive 0.5% in March and thus 1.4% year to date. On the whole developed equity markets carried on upwards in March with the likes of the S&P 500 recording its best first quarter since 1998.The MSCI World Index gained 11%( in US$ terms) in the first quarter. Emerging markets fared worse than the developed markets in March losing 3.5%, but ended the first quarter up by 13.7%( in US$ terms).

The US Federal Reserve has retained its fed fund target at 0% to 0.25% and has stated that conditions are likely to warrant these rates until late 2014.

Nevertheless, the recent economic conditions in the US have surprised on the positive side. The Chinese Authorities have announced a 2012 GDP growth target of 7.5%, below its long standing target of 8%. There are continued signs of stability in the Euro-zone crisis (not the end of the crisis), despite worries about Portugal and Spain requiring additional support. In light of these developments we continue to believe that the prospects for equities globally in 2012 seem brighter.

The Johannesburg Stock exchange All Share Index ended December 2.5% lower and delivered a total return of 2.6% for 2011. The Rand gained 0.6% against the US Dollar but was 21.9% below its end of 2010 level. The South African All Bond Index gained 0.7% in December to deliver a positive 8.8% return for 2011. Cash delivered a positive 0.5% in December and thus 5.27 year to date.

Developed equity markets were mixed in December with the MSCI World Index unchanged and emerging markets were slightly weaker with the MSCI Emerging Market Index losing 1.2%. The MSCI World Index (in Dollar terms) lost 5.0 in 2011. The MSCI Emerging Market Free Index (in Dollar terms) lost 18.2% year to date. The broad based CRB commodity index was 2.7% lower in December and lost 8.3% in 2011.

SA GDP growth momentum is still forecast to be slow in the fourth quarter of 2011 as the latest manufacturing and mining data releases suggest another quarter of meager growth in 2011 in the range of 2.5%. CPI rose to 6.1% year on year in November and the SARB forecast the inflation rate will peak in the second quarter of 2011 at 6.3%. Credit extension to the private sector grew at a rate of 6.2% in November from 5.5% in October. In 2011 foreigners were net buyers of SA bonds amounting to R47.4bn, making it the third year in a row of net foreign buying of SA bonds. In 2011 foreigners were net sellers of R17.2bn SA equities, making it the first year of net selling by foreigners since 2009.

The IMF recently forecast US growth of 1.8% year on year in 2012, and global growth of 4% year on year but has warned that it is revising global growth down significantly as a downward revision of European growth is imminent. Italy and Spain have massive amounts of debts that need to be financed in the next few months and until the markets are convinced that the ECB or the EFSF is able to finance the massive debts. At the same time the past month has seen a strong rebound in almost all the economic data coming out of the US, still the world's largest economy. Even the lagging employment data has recently looked much better pointing to a more sustainable recovery! Equity performance globally still hinges on the ability of the European politicians to stabilize the European debt crisis. It continues to be a volatile trading equity market environment.

The Johannesburg Stock Exchange All Share Index ended September 4.3% lower and is now 7.6% lower year to date. The Rand was 15.7% weaker against the US Dollar and is now 22.2% below its end of 2010 level. The South African All Bond Index delivered a negative 2.1% in September to deliver a positive 5.1% return year to date. Cash delivered a positive 0.5% in September and thus 4.3% year to date.

Developed equity markets were weak in September with the MSCI World Index losing 9.5% and emerging markets were also weak with the MSCI Emerging Market Index losing 14.8%. The MSCI World Index (in Dollar terms) is 14.8% lower year to date. The MSCI Emerging Market Free Index (in Dollar terms) is now down 23.5% year to date. The broad based CRB commodity index was down 13% in September and is down 10.8% year to date.

The latest comments from both the SA Treasury and Reserve Bank have indicated that they are also downgrading SA growth prospects for 2011 and 2012.

However, growth is still reasonable at 3% in 2011 and 2.5% in 2012 when compared to the previous two years. In 2010 the SA economy grew by 2.8% compared to a decline of 1.7% in 2009. Credit growth remains subdued with private credit extension growing at 6.1% year on year in August despite the lowest nominal interest rates in thirty years. Total new vehicle sales as reported by NAAMSA recorded surprisingly strong growth in September of 30% year on year. Year to date domestic sales are 16% ahead of 2010. Foreigners became big sellers of SA bonds and equities in September. Foreigners sold R18.3bn of bonds but remain net buyers for the year at R27.5bn. Foreigners sold R7.9bn of equities in September and year to date have sold a net R17.2bn.

Most of the major developed equity markets and emerging markets have continued to sell off heavily and now many shares seem to be trading at compelling valuations. In our opinion many equity markets have already discounted a recession and a Greek default. In addition the bond markets have also discounted a severe recession with 10 year US and German bunds well below 2%, not to mention Japanese and Swiss yields below 1%, and in real terms delivering negative returns. We do not think that we are back in a 2008 scenario where global GDP contracts, in fact forecasts are still for 3.5 to 4% global GDP growth in 2012. The relative value of equities compared to cash and bonds continues to be very appealing in developed markets. In the South African context we believe that stock picking is more important and that the cheapest part of the equity market is tied to global growth, namely resources. Many of the shares we have bought have healthy dividend yields especially in a lower for longer interest rate environment. We remain somewhat cautious about immediate equity prospects at this stage but are positioned for a rebound in oversold equities as the G20 and EU let Greece default in an orderly way and give the markets the certainty that they want!