China's November industrial production growth eased sharply from 5.9% to 5.4%, the lowest level since 2009. Global stocks plunged.
Retail growth also eased, growing at 8.1%, which is the weakest pace in 15 years.
Cracks are also continuing to show in Europe, with Italy, Germany, car sales, France, and Brexit all weighing on sentiment.
Fear has taken hold in equity markets after China's industrial production plummeted, sparking a selloff that spread globally. Cracks in the European economy are also continuing to show, weighing on those region's equities.
 
China's November industrial production growth eased sharply from 5.9% to 5.4%, the lowest level since 2009. The data pointed to weak performance in key export sectors such as computers, electronics and autos.
 
Retail growth also eased, growing at 8.1%, which is the weakest pace in 15 years, says Russ Mould, investment director at AJ Bell.
 
China's November trade data indicated signs of weaker growth in the rest of the world. Export growth declined from 15.5% to 5.4% with shipments to the EU and ASEAN countries showing weakness while exports to the US dropped to 9.8% from 13.2%, according to Societe Generale.
 
"There have been some troublesome figures coming out of China in 2018 and another batch has now served to drag down markets in Asia and Europe," Mould said. "China is finding it hard to sustain high levels of economic growth. There is some concern that the impact of the US-China trade war has yet to be properly felt, suggesting that China's economic data could be in for more shocks in early 2019 unless the countries secure a permanent truce."
 
Problems are also rumbling in Europe. Fears about Italy's budget remained front and center on Friday after the European Union suggested there was more to be done on the country's budget deficit. British Prime Minister Theresa May was rebuffed by EU leaders in her attempts to renegotiate her Brexit deal. Germany's problems continued with composite PMI numbers sliding in December.
 
It follows an already subdued mood in Europe. The European Central Bank announced Thursday that it cut its economic growth forecasts and would end its bond buying stimulus program. France's yellow-vest protests are harming the country's economy.
 
Here's a roundup of markets:
 
The JSE was down 1% and the rand slumped 1.5% to R14.37/$ early afternoon on Friday.
In Asia, the Shanghai Composite closed down 1.7%. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.3%. Japan's Nikkei also fell 2% Friday.
 
The Euro Stoxx 50 down 1.1% as of 10.20 am in London (5.20 am EST). The DAX, FTSE, and CAC were all down more than 1%.
US stock index futures are following suit. The Nasdaq, S&P 500 and Dow 30 all down about 1% in premarket.
 
China's woes weighed on commodities. Copper futures are down 1% while Brent crude continued to tumble despite agreed OPEC and Russian cuts last week. Oil is down 0.6%.
 
European car stocks also plunged after data showed new EU licenses fell 8.0% year-over-year in November following a 7.3% fall in October. Renault is down 3.6% while Volkswagen, Peugeot, Daimler are trading down 2.4%. Germany's BMW is down 1.9% and Fiat Chrysler is down 2%. Full year car sales are expected to drop to 2% in 2018, down from 5% in 2017.
 
US dollar index futures are up 0.5%.
 
 
Source: Business Insider
Global markets fall once again on Tuesday after brief two-day relief rally.
A "poisonous brewing cauldron of geopolitical and economic issues" is to blame for the risk-off sentiment gripping investors.
Losses are led by Asia, which has seen virtually all major indexes drop more than 2% on Tuesday.
Europe is following suit, with Germany's DAX down more than 1.2%. US futures are also pointing to substantial losses.
The JSE fell almost 2%.
You can follow the latest developments in global markets at Markets Insider.
Global markets slumped once again on Tuesday as the continent's two-day-long relief rally came to an abrupt end, thanks to a cocktail of negative drivers.
 
All major Asian indexes lost ground during Tuesday's session, with the FTSE China A50 the biggest casualty, down more than 3%. Other mainland Chinese indexes lost more than 2%, with the Shanghai and Shenzhen Composite indexes both down around 2.2%.
 
Losses were not contained to China, however, with Japan's Nikkei losing 2.7%, and Hong Kong's Hang Seng dropping close to 3% after a sharp fall into the close.
 
There was no single catalyst for the losses, with growing geopolitical tensions between Saudi Arabia and the West over the death of journalist Jamal Khashosggi, resurfaced fears about President Trump's trade war, and generally waning confidence in the Chinese economy all partially to blame.
 
"Big swings in the Chinese markets continued, with the previous two-day rally moving sharply into reverse. After mulling over Chinese stimulus plans the market is seeing these stimulus measures as cushioning a fall rather than boosting the economy," Jasper Lawler, head of research at London Capital Group said in a morning briefing.
 
"It was all too much for the markets on Tuesday. The poisonous brewing cauldron of geopolitical and economic issues led to one of those opens as nuance-less as it was red," Connor Campbell, analyst at Spreadex added.
 
Fears abound that the sell-off in China could get worse as a wave of forced share selling kicks in for Chinese companies who use their shares as colleteral for loans.
 
According to Bloomberg, about 4.18 trillion yuan (R8.7 trillion) worth of shares have been put up by company founders and other major investors as collateral for loans, accounting for about 11% of the country's stock market capitalization, based on calculations using China Securities Depository and Clearing Corporation data.
 
The South China Morning Post, citing a report by Tianfeng Securities, said earlier in the week tha tmore than 600 company stocks have fallen to levels where forced sales may kick in.
 
"It's a vicious cycle: share drops lead to liquidation and liquidation leads to further share drops," Wang Zheng, chief investment officer at Jingxi Investment Management told the South China Morning Post last week.
 
The JSE's all share index was down 1.7% by midday, but the rand was marginally stronger at R14.35/$.
 
Naspers, down 3% to R2,725.58, and Nedcor, which lost 3.7% to R225.03 were some of the worst hit among large companies. 
 
Gold stocks are booming again, with Sibanye up 11% to R11.64. Nervous investors are buying gold, which jumped a percent to $1,234/oz this morning.
 
European stocks have also witnessed losses in the first hour of trading, although not as severe as those in Asia. By midday, Germany's DAX has dropped 1.2%, while the UK's benchmark FTSE 100 index is around 0.7% lower. The Euro Stoxx 50 broad index is down 0.8%.
 
"Sentiment continues to take a hit from a combination of geopolitical tensions including the growing isolation of Saudi Arabia, Italy's defiant stance towards the ECB and Brexit," Lawler said.
 
US futures are also pointing to big losses when markets open stateside, with the Nasdaq pointing to an opening loss of 1.1%, while both the S&P 500 and the Dow Jones look to fall around 0.9%
 
 
Source: Bloomberg news

After rising for a record 15 consecutive months to end January 2018, the S&P 500 index has recently pulled back. This is a welcome development for local fund managers looking for global opportunities. 

For most of 2017, PSG Asset Management expressed concern about the generally elevated levels of global equity markets, based on high valuation ratios (relative to historical levels) and extreme investor complacency.

Conversely, PSG has been increasingly positive on domestically focused South African companies. Here, political and economic uncertainty has kept prices low, despite the inherent quality in these businesses.

“We were finding fewer high-conviction opportunities across global markets and our offshore equity allocations across our domestic funds have not been at full capacity,” says Philipp Wörz, fund manager of the PSG Global Equity and PSG Global Flexible Funds. Cash levels in the PSG Global Flexible Fund steadily increased throughout 2017 and after the strong start to global equity markets in 2018, the fund’s cash exposure reached a record high of 37% in late January.

“The true value of cash shows itself when volatility rises, prices fall and liquidity is in short supply. Then it becomes valuable firepower to capitalise on market mispricing. The recent pullback in global markets has presented a number of opportunities to deploy our cash reserves,” says Wörz.

Wörz notes that several areas of the markets have presented excellent global investment opportunities over the last three months. One such area has been the US retail property sector, where historic overbuild, department store issues, fears of online cannibalisation and higher interest rates have driven valuations to low levels.

“People tend to paint specific sectors with the same brush, and while mall traffic has been under pressure for some time, this doesn’t apply to top-quality, Class A retail properties, which remain sought-after assets,” says Wörz.

PSG Asset Management have been buyers of the New York-listed Simon Property Group, the world’s leading retail Real Estate Investment Trust (REIT). It owns over 190 retail destinations in the United States and has a growing international footprint with 27 assets located in 11 different countries. Simon is also the largest lessor of Class A real estate in the US and owns five of that country’s top 10 malls.  The company has compounded its distributions per share by 8.5% per year over the past 16 years and currently yields 5.1% – a spread of 2.3% over US Treasury bonds.

“We have also found company-specific opportunities in Japanese financials, agricultural commodity producers and energy services,” says Wörz. 

At end March 2018, cash in the PSG Global Flexible Fund stood at 28%, and offshore allocations in domestic funds have been increased.

Despite the recent declines, overall market valuations remain high

“Investors should bear in mind that although markets have declined by approximately 10% from recent highs, overall market valuations are still elevated when compared to history. In fact, many stocks are only back to where they were a few months ago,” says Wörz.

Fortunately, for bottom-up stock selectors the global investment environment remains one characterised by extremes. “The differences between the prices paid for expensive stocks that dominate indices and those paid for cheap, out-of-favour stocks are at levels last seen during the dotcom bubble,” says Wörz.

The funds that PSG Asset Management have recently allocated to are in areas of the market characterised by higher levels of uncertainty as this is where general sentiment results in the mispricing of attractive opportunities.

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