2019/10/25 00:00:00

September proved to be a relatively resilient month for global equity markets in the face of a string of negative news. Escalating trade-war tensions between the US and China, the start of efforts to impeach President Trump, Brexit uncertainty in the UK and political instability in Europe (particularly in Italy), were not enough to dampen investor sentiment as developed and emerging markets both closed the month in the black. In the US, President Trump's administration announced that it was considering delisting Chinese companies from US stock exchanges. The move formed part of a broader effort to limit US investment in Chinese companies. In keeping with market expectations, the US Federal Reserve cut interest rates by 25 bps, citing the prolonged US-China trade war and weak global economic growth as ongoing risk factors. Markets however, were disappointed as the Fed downplayed expectations of further interest rates cuts. In the UK, the Supreme Court ruled Prime Minister Johnson’s move to suspend Parliament was illegal, triggering calls from opposition parties for him to step down. In the EU, outgoing ECB president Mario Draghi announced that the central bank would cut interest rates by 10bps (below market expectations of a 20bp cut) and would continue to keep rates at accommodative levels until inflation showed signs of approaching the 2.0% target. China, meanwhile, filed a lawsuit with the World Trade Organization after the US imposed an additional 15% tariff on US$300bn worth of Chinese imports from 1 September. In retaliation to the tariff increase, China levied new duties of between 5-10% on US$75bn worth of American imports, including crude oil.
Looking at global equity market returns (all in US$), developed markets outperformed emerging markets, with the MSCI World Index delivering 2.2% and the MSCI Emerging Markets Index returning 1.9%. Among developed markets, the S&P 500 produced 1.9%, the Dow Jones Industrial 30 returned 2.1%, while the technology-heavy Nasdaq 100 posted 0.8%. The UK’s FTSE 100 returned 4.2% and Japan’s Nikkei 225 delivered 4.0%. The rand strengthened 1.1% against the euro and 0.1% against the dollar, but weakened 1.1% against the pound sterling.
In US dollar terms, exposure to US, Japanese and European equities contributed to performance in September, while exposure to Indonesian equities detracted the most from value.