Listed Property outpaces the FTSE/JSE All Share Index

Posted On Thursday, 29 September 2011 02:00 Published by
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Listed property was a beneficiary of August’s more benign interest rate expectations, with a 2.8% total return

Reserve BankProperty underperformed the FTSE/JSE All Bond Index’s 3.5% gains as property yields fell less than bond yields as a result of the reduced interest rate expectations. Property did outpace the FTSE/JSE All Share Index’s performance of -0.3%, but lagged the consumer services sector’s 3.7% gain, the equity sector most closely linked to property . In August, listed property funds representing 62% of the sector by value reported their results. On average, distributions were 6.6% higher than the previous six months. Results season was disappointing on balance, and highlighted the continued difficulties experienced in neighbourhood and community shopping centres, offices (especially B-grade) and hotels. Of those funds which provided guidance for future performance, two expect growth of 8-11%, two expect slightly negative to 3% growth, and heavyweight Growthpoint provided guidance between these two ranges.

16 – 22 September 2011 in a nutshell

Global: Continued U.S. economic growth and budget concerns, as well as the debt and banking issues in the Eurozone, drove markets down this week. The S&P 500 slipped 6.54% and its European counterpart fell 7.40%, while emerging markets plunged a striking 8.58%.
South Africa: South African stocks showed the highest drop in 16 months following the carnage in global markets. The FTSE/JSE All Share Index was lower, falling 2.18%, mirroring global market trends. Most sectors show negative growth

Markets and Economics – Highlights

Global


  • While U.S economic activity rose more than expected in August, with leading economic indicators rising 0.3% in the month, economists do not expect it to accelerate much any time soon. In fact, U.S data suggests that there is a growing risk that sustained weak confidence could put downward pressure on demand and business activity, causing the economy to potentially dip into recession. According to Bloomberg, consumer confidence in the U.S. dropped to the weakest point since the recession ended in June 2009, falling to -52.1 from -49.3 during the week to September. 18. Meanwhile, initial claims for state unemployment benefits have dipped but the trend has moved higher. The four-week moving average of new claims edged up to 421,000, the highest level since July 16.
  • Europe is on the edge of recession as it grapples with a crippling debt crisis, as reflected by its downbeat leading economic indicators. Consumer optimism fell to a two-year low of -18.5 in the Eurozone this month, according to the European Commission's Index, while Eurostat reported that industrial orders fell 2.1% in July, and that economic growth was less than expected at 0.2% in the second quarter. Similarly, Markit's monthly purchasing managers index (PMI) - a gauge of business activity - fell to 49.2 in September, its lowest level since July 2009, from 50.7 the previous month.
  • Risk aversion returned to the market after Brazil's statistics institute announced that economic growth slowed last quarter to 3.2% from a year earlier, down from 4.2% in the first quarter and 7.5% last year. The lower growth may reflect the impact of international economic turbulence on the Brazilian economy. Meanwhile, Brazil’s unemployment rate was unchanged at 6% in August, compared with economists’ expectations of 6.1%.

South Africa:

  • The South African rand plunged more than 10% against the US dollar in the past week, making it the worst performing of the 18 emerging market currencies tracked against the dollar by Bloomberg this week. The rand, like most emerging market currencies, fell victim to a bourgeoning US dollar as investors scrambled into safe-haven investments like US and Japanese bonds following growing unease over Europe’s sovereign debt crisis and the US’s “stuttering” economy. Global economic fears morphed into total panic as the US Federal Reserve failed to ease concerns, and consequently, South African stocks showed the highest drop in 16 months following the global markets carnage.
  • South African Reserve Bank (SARB) Governor Gill Marcus announced that the interest rate will remain unchanged at 5.5% for a fifth consecutive meeting. The sharp drop in the rand as well as possible rising inflationary implications has fortified the SARB’s expected “wait and see” approach as South Africa struggles to meet the 7% annual growth projection needed to ease the unemployment rate from its current rate of 25.7%, to 14% over the next decade.
Last modified on Wednesday, 23 April 2014 18:16

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