The South African JSE was negative for the third month in a row in line with global equity markets as seen by the FTSE/JSE Capped SWIX Index -2.9% month on month (m/m), according to Peter Little, a fund manager at Anchor Capital.
This dragged the bourse further into negative territory for 2023, down 3.2% in the year to date.
Global equity markets fell for a third consecutive month, with the MSCI World down 2.9% m/m, leaving them down almost 10% since the end of July.
Losses were again fairly broad-based, though, with the gold miners (+21% m/m) bucking the trend as they followed the gold price higher in October (+7% m/m). The impact of geopolitical risk seemingly outweighed the headwind typically posed to the precious metal price by higher rates, he said.
Outside of the gold miners, there were a few positive contributions at an individual company level, including retailer Tiger Brands (+12% m/m), which bounced off depressed levels as the announcement of new management brought the prospect of a turnaround in fortunes, and retailer Clicks (+6% m/m), which announced surprisingly resilient 2023 earnings.
However, Little said at the other end of the spectrum, retailer Pick n Pay (-32% m/m) reported a first-half 2024 loss and skipped the interim dividend, while mobile giant MTN (-19% m/m) was weighed down by the announcement of another spurious demand for tax payment by the Nigerian authorities and significant weakness in the Nigerian currency.
He said South Africa’s latest inflation data showed headline inflation rose 5.4% year on year (y/y), which accelerated in line with expectation as rising food and energy prices continued to take their toll.
In comparison, core inflation, excluding those volatile categories, slowed to 4.5% y/y, coming in below expectations at 4.7% y/y.
Little said: “The US dollar has been strong for the past few months, buoyed by higher US rates and general risk aversion. However, the rand held up relatively well, finding itself amongst a small grouping of currencies to strengthen against the US dollar in October (+1.5% m/m).”
Still, he said the local unit remained towards the back of the queue in its 2023 performance against the greenback, down 8.6% in the year to date after a tough start to the year.
The South African government’s long-term borrowing rate also defied the global trend in October, falling marginally to 12.3% per annum in the face of generally higher global bond yields.
Little said the three-month sell-off in global stocks coincided with a 1% increase in US 10-year government bond yields, which touched 5% per annum. for the first time in over 16 years during October.
“There was no hiding place for investors in October, with all major stock markets and industry sectors down for the month,” he said, pointing to lower bonds: Bloomberg Global Bond index down 1.2% m/m and listed real estate FTSE/NAREIT Global REIT Index 4.8% lower m/m.
He said rates drifted higher as US economic data continued to defy expectations of a slowdown. Stronger-than-anticipated September US retail sales, which were 0.7% higher m/m and better than the market had expected, were followed by the release of the third-quarter US gross domestic product data, with a growth hike of 4.9% quarter on quarter - ahead of expectations.
Emerging markets, looking at the MSCI Emerging Markets, was down 3.9% m/m, under-performing developed markets to leave them in negative territory for 2023, down 1.8% in the year to date.