December 2024 Update
Making The News
- Chinese Fiscal Stimulus
Despite multiple challenges, China’s economic growth has remained robust at 4.8 percent in the first three quarters of the year. But growth has moderated since the second quarter of 2024, weighed down by subdued domestic demand and a prolonged downturn in the property sector. Chinese authorities have agreed to issue 3 trillion-yuan ($411.04 billion) worth of special treasury bonds in 2025 and have agreed to raise the budget deficit to 4% of gross domestic product, its highest on record, while maintaining an economic growth target of around 5%. Chinese equities performed relatively well in December (-0.3%) and were the key to EM’s outperformance (MSCI EM -0.1% vs MSCI World -2.6%).
- Another rate cut from the Federal Reserve
The US Federal Reserve (Fed) announced a much-anticipated third consecutive rate cut at its December meeting, having cut rates by 1% (to 4.33%) since September. The press conference that followed the meeting and the release of the quarterly forecasts from Fed members painted a more hawkish picture than investors were anticipating, with the average Fed member now only anticipating 0.5% of rate cuts in 2025. The surprisingly hawkish tone from the Fed resulted in a spike in US rates, leaving the US government’s 10-year funding rate at 4.6% p.a. at year-end, the highest year-end mark for that rate since 2006.
- Commodities
Brent crude oil ended the year at US$75/bbl, rallying in December (+2.3%), though still ending the year lower (-3.1%). Industrial metals (-1.4%% MoM and -1.6% YoY) struggled with a weaker Chinese economy, particularly iron ore (-2% MoM and -28% YoY). Gold was one of the better performers in 2024 (+27% YoY) despite a soft finish in December (-0.7% MoM).
- Rand weakened in December but flourished in 2024
The domestic currency was one of the worst-performing major currency pairs against the US dollar in December, leaving it weaker against the Dollar for the year (-3,2%). Despite the tough end to the year, the Rand found itself as the fourth-best-performing major currency against a strong US dollar in 2024 (behind the Malaysian ringgit, Thai baht, and British pound).
