Strong and
effective leadership is something that is a necessity now in SA. You read
daily about how our leaders call for one thing but their actions convey a
different message. Most of us are not easily fooled and can see through
lies, even if this takes a while. It is human nature to be sceptical and when
you’ve been waiting for an RDP house for over 20 years, your scepticism is well
founded.
I’m putting
this out there at the start as we must realise one thing, although this is a
big issue in our country, and one that we must sort out for our own good. We
are at the bottom of a massive continent and relatively isolated from the rest
of the world, figuratively. This tends to make us look inward and the world out there that doesn’t take much notice. It continues no matter
what happens at our ANC’s NGC and neither do they care what Kohler-Barnard
posted on her FB page. We, as South Africans, get caught up in what happens locally
and forget that what happens globally has a much bigger impact on our markets
then any internal force could ever hope to achieve.
This brings
me to the volatility in our local bourse over the last 12 months – shown on the graph below:
Although it is positive, within this
time we have bounced up 14 % & then down the same amount. We are still down
from that high and all of this volatility has very little to do with us. It is
driven mostly by what has happened in Chinese stock markets and uncertainty
over what the US Federal Reserve (Fed) was going to do around its interest
rates.
The Fed decided
on 17th Sept 2015 to keep rates on hold. The build up to this rates
decision caused much consternation because at some point they will have to
increase. Prevailing opinions are that when this happens it will negatively
affect global markets and especially Emerging Markets ("EM’s" which includes us).
Mostly due to the fact that a lot of EM’s government & most Corporate (private) debt is
held or denominated in US dollars. So an increase of even 0.25% will have a
dramatic effect on our debt payments, account deficits and in the end our
markets. Here is a graph here of what Emerging market debt looks
like and what it is made up of (including ths changes in it).
You see
the world is still swimming with cheap money and when we all have to pay it
back is when real pain will set in. We will all have to "pay back the money".
So it’s a
double whammy. Chinese markets took a massive tumble, from a high in May
2015 their market is down around 26 % (to just last month). That is almost two
thirds of what our market lost in the 2008 crash. The two largest economies on
the planet have a huge impact on the way the world sees its finances. With China
beginning to surpassing the US as a main trading partner for many countries
what happens there does have a direct impact. Just today there was results that
their imports are down over 17.7 % month-on-month (14.3 % last month).
So although things are rough, what we need is perspective
when it comes to ones financial planning. Always consider what is happening in
our world as well as what is happening locally. That way we will gain a better
perspective in that our local economy, although struggling, is no different to all
emerging markets. Remember to keep your end goal in mind when investing and if
that end goal is 3 – 5 years away, I would advise caution in your asset
allocation.
So will our leadership be able to weather their own and this global volatility? With local government elections coming up soon things will get interesting before that but in the end it is our national elections where things really count. If our government doesn't start taking leadership seriously we may be in for many more years of sluggish growth. I say this in reference to the appointment of the new Mining minister, who has no qualifications in this arena. He has also many questions over his head that haven't been cleared up. This when our mining industry is in the worst state ever. I feel that this shows a lack of understanding of how a strong and capable leader can guide a person, a company and even a country in the direction it requires to grow. We need qualified and knowledgeable leaders in the appropriate positions urgently.
No comments:
Post a Comment