After the month of horror in September, October surprised all on the up side. Performance was strong across asset classes. The turnaround was driven by positive news flow from Europe supporting risky assets. Commodities corrected somewhat, but Hot Rolled Steel and Iron Ore had a weak month. Iron Ore traded to below $120 per metric ton, driven by Chinese destocking. It subsequently recovered to $147 per metric ton in a very volatile market.

European sovereign debt has been the news story of the month (especially Italian debt). If you look comparatively at the 10 Year European bonds, the Irish and Portuguese are still trading way above Italy and Spain. Greece is way off the charts. The selloff in both Italy and Spain is noticeable.

Source: Bloomberg

On the domestic front, the Rand stabilised between R7.80 and R8.20. The currency remains extremely volatile and is being driven by the macro environment. The domestic equity market has been fairly flat in 2011. Performance on a year to date basis was mainly driven by Industrial Shares. Resource Shares underperformed over the past month. Listed Property Shares, Bonds and Preference Shares had a good month, mostly driven by the bond curve.

We expect the asset classes to be correlated to the Rand. The Rand indicates Risk perception, driven by the European crisis.

Until next time,

Eugene

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