Market watchers will be well attuned to jitters permeating markets right now. It’s not evidently panic yet but sentiment is noticeably circumspect towards riskier asset classes, equities especially.
Febrile commentators are looking everywhere for signs that a crash is on the horizon. And it may well be.
But calling tops and bottoms to markets is a mug’s game. The reality is that no one really knows what lurks around the corner.
In this environment, however, vigilance is advised, especially in the countdown to one particular event.
The world is – and has been for some time – watching the Federal Reserve for indication of when interest rates will rise in the US. South Africa, for one, is paying heed.
Not least because our market is extremely sensitive to the influx and exodus of foreign money.
Global funds have driven the market for the last five years and more, pushing stocks to record highs.
Investors beyond our borders have poured money into local assets, banking on better yields than they can muster in low interest-rate environments in the US and Europe.
America’s quantitative easing programme fuelled the ardour for emerging markets, including SA.
As all this easy cash came in, it pushed stock prices way beyond reasonable valuations.
Then, as the US tapered off with its liquidity programme, the Europeans announced a similar exercise. Anything to avoid deflation and the terminal decline that has hobbled Japan for decades.
What we were left with was a steamy stock exchange measured against a languid economy growing at about 2% a year.
But all that bullishness has started to unwind lately. With good economic data coming out of the US, investors are readying themselves for an expected rate hike.
When it happens, it will spark renewed selling in South Africa as investors seek improving yield across the Atlantic.
It’s no surprise that retailers, who investors took a shine to, have endured a strong sell off. The South African consumer continues to face pressures on various fronts, what with steep electricity tariff increases coming and a weaker currency doing nothing to stem inflation.
The JSE itself fell 10 days in a row last week, something that many analysts were unable to recall happening in recent memory.
The decline in percentage points was not all that dramatic, though, offering up one of two conclusions: that further pain is to come or the dip was just a routine pullback that occurs twice a year or so.
Companies embarking on equity raises for the purposes of expansion will feel the effects of a falling market. Coupled with our tepid economic growth, the outlook remains bleak. Time to hang on because the ride is about to get bumpier.
Editorial: Brace for bumpy ride
Febrile commentators are looking everywhere for signs that a crash is on the horizon. And it may well be.
But calling tops and bottoms to markets is a mug’s game. The reality is that no one really knows what lurks around the corner.
In this environment, however, vigilance is advised, especially in the countdown to one particular event.
The world is – and has been for some time – watching the Federal Reserve for indication of when interest rates will rise in the US. South Africa, for one, is paying heed.
Not least because our market is extremely sensitive to the influx and exodus of foreign money.
Global funds have driven the market for the last five years and more, pushing stocks to record highs.
Investors beyond our borders have poured money into local assets, banking on better yields than they can muster in low interest-rate environments in the US and Europe.
America’s quantitative easing programme fuelled the ardour for emerging markets, including SA.
As all this easy cash came in, it pushed stock prices way beyond reasonable valuations.
Then, as the US tapered off with its liquidity programme, the Europeans announced a similar exercise. Anything to avoid deflation and the terminal decline that has hobbled Japan for decades.
What we were left with was a steamy stock exchange measured against a languid economy growing at about 2% a year.
But all that bullishness has started to unwind lately. With good economic data coming out of the US, investors are readying themselves for an expected rate hike.
When it happens, it will spark renewed selling in South Africa as investors seek improving yield across the Atlantic.
It’s no surprise that retailers, who investors took a shine to, have endured a strong sell off. The South African consumer continues to face pressures on various fronts, what with steep electricity tariff increases coming and a weaker currency doing nothing to stem inflation.
The JSE itself fell 10 days in a row last week, something that many analysts were unable to recall happening in recent memory.
The decline in percentage points was not all that dramatic, though, offering up one of two conclusions: that further pain is to come or the dip was just a routine pullback that occurs twice a year or so.
Companies embarking on equity raises for the purposes of expansion will feel the effects of a falling market. Coupled with our tepid economic growth, the outlook remains bleak. Time to hang on because the ride is about to get bumpier.
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