By Peter Little
The South African (SA) bourse was the best performing amongst major emerging market (EM) peers FTSE/JSE Capped SWIX Index, up 2.9% month on month (m/m) in March, as it clawed its way back towards positive territory. However, the FTSE/JSE Capped SWIX is still down 2.3% in the year to date.
Gold miners rose 24% m/m and were a major boost to the JSE’s performance as shares of these miners tracked the price of the yellow metal higher. Gold was up 9% m/m with the price posting new all-time highs during the month.
Platinum group metal (PGM) miners increased 11% m/m and also benefited from March’s bounce in metal prices. PGM and gold miners were responsible for more than 2% of the FTSE/JSE Capped Swix’s performance last month.
Shares geared towards the domestic economy generally disappointed, particularly financial companies. Discovery fell 11% m/m after it announced disappointing first-half 2024 results during the month as adjustments related to new reporting standards (IFRS 17) added complexity to its earnings, predominantly in the life insurance division, which resulted in its embedded value dropping by 22%.
Standard Bank shares slid 8% m/m and also had a disappointing month, as the release of its annual 2023 earnings was accompanied by a lacklustre outlook for financial year 2024 earnings growth.
However, diversified miners held up surprisingly well, given their exposure to iron ore, which tumbled 18% m/m to leave the metal 28% lower in the year to date. China, the world’s biggest iron ore consumer, has recently urged steel mills to reduce production intensity, and Chinese port holdings of iron ore surged 14% in quarter one 2024 as the nation’s real estate sector continues to struggle.
SA economic data released during the month showed the country narrowly avoiding a recession in the fourth quarter of 2023, up 0.1% in the quarter on quarter, while the latest inflation data came in marginally higher than expectations, with core inflation up 5% year on year (y/y) jumping relative to the prior month’s print of a + 4.6% y/y and climbing above the target midpoint of 4.5% y/y of the South African Reserve Bank (SARB).
The spike in prices was primarily a result of the inclusion of the results of the bi-annual survey of medical health insurance costs, which came in at an annualised rate of 12.9%.
As expected, lingering inflationary pressure - locally and globally -allowed the SARB to keep the current elevated repo rate at 8.25% per annum on hold.
The rand was amongst the stronger EM currencies relative to the US dollar in March , up 1.7% m/m. However, borrowing rates for the SA government climbed, defying a relatively benign global interest rate environment. The SA 10-year government borrowing rate advanced by 0.6% to end the month at 12.3%.
Peter Little is a fund manager at Anchor Capital
BUSINESS REPORT