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MSM Property Monthly: Goodbye 2021

DEAR INVESTOR,

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As we say Goodbye to an eventful year, we look forward a refreshing 2022. With next months newsletter, we shall go through out 2021 report card and make predictions for the coming year, so don’t miss it!

Highlights:​​

  • Listed Property up 27%, Year-to-Date
  • General Equities up 30%, Year-to-Date

Performance

We fell behind the index due to our portfolio being in a defense stance and changing of it to risk-on, resulting in the listed property portfolio being up 1.47% versus the All Property Index finishing the month of November off at 2.17%. For the year-to-date performance (1st January to 30th November 2021), the listed property portfolio is up 27.3% whilst the general equities portfolio is up 30% versus the All Share index benchmark at 24%. If you had your money in cash (typically fixed deposit), you would have only earned at best 6% pre-tax with official inflation rate being at 5.5% which automatically pushes you into negative real growth (-1%) of capital. This means that you would have technically lost money due to placing it in cash and not investing. Hence why Ray Dalio, a now famous American investor billionaire, states that “Cash is trash” when central banks have increased money supply thereby increasing inflation which lessens your buying power. Instead, one should invest it and cash is only critical once in every 8-10 years, typically during a crash, which should be used to buy more inflation beating assets.

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Global Market Themes

The increased amount of monetary stimulus in America’s economy has been a source of contention as the markets have pressured the Federal Reserve to increase interest rates, due to inflation being at 6.2% Even so, Jeremy Powell, who was re-elected by Joe Biden turned hawkish and announced tapering of $15bn worth of bonds for the month of November and December each but did not increase interest rates. Even with unemployment being as low as 4.2% and 604k jobs being created during October beating expectations, the Fed still seeks full employment and will start to increase interest rates in 2022. Some economists have predicted that there will be 3 interest rate hikes so that the Fed can gain control of the runaway inflation. The emergence of the Omicron variant, discovered by South African scientist set global markets for a correction but bounced back as more data came out regarding hospitalizations, leaving the markets down by 2.2%.

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The Eurozone and UK regions followed suit as markets dropped with the STOXX All Europe down by 2.8%, and the UK imposing travel bans on South Africa and other southern African countries even though Omicron was found to be first identified in Europe and the UK fairing much worse in terms of cases and hospitalizations. The Eurozone saw mixed economic data and witnessed a surge in Covid cases as the region went into winter. The discovery of Omicron also put the ECB on the back foot with increasing interest rates as everyone assessed the new variant and its possible effects on the economy. In Asia, China saw a marked increase in Covid cases with some regions going under lockdown. The Chinese economy saw producer inflation beat estimates along with retail numbers being better than expectations. Chinese leaders also met to discuss the future of the economy for next year and the central bank of China announced cheaper funding to the banks so as to assist them with the faltering property developers such as Evergrande as the highly indebted companies are taken over by the government regulators and managed.

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South African Themes

For South Africa, the low turnout for elections handed the ruling party an embarrassing loss of several municipalities as the ANC government missed the 50% threshold for majority, which had never been witnessed since the 1994 elections. Markets were then suddenly hit hard by the Omicron sell-off as South African scientists discovered the new variant with several western countries putting travel bans on the country. Nonetheless, the mid-term budget announced by the new finance minister revealed an improving fiscal situation with debt to GDP decreasing from 81.9% to 69.9% and a projected 5% increase in South Africa’s GDP for 2021. Fitch Rating Agency released positive news by increasing South Africa’s rating from negative to stable and the reserve bank increased interest rates by 25bps so as to curb the rampant inflation which came in at 5.5%

We ask you to be safe and feel free to contact us with any questions and we appreciate your support and confidence in us, in being able to manage your wealth.

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