By Peter Little
SOUTH African stocks ended the quarter strongly, delivering a double-digit first quarter 2021 return of an increase of 12.6 percent - its second consecutive double-digit quarterly return.
In the fourth quarter of 2020 it recorded an 11.5 percent gain.
A slew of earnings announcements during March delivered generally better-than-expected results and saw gains across the board for JSE-listed companies.
Insurers were a rare weak spot for March, as earnings results were accompanied by a cautious tone and news of additional provisions against claims related to new waves of Covid-19 infections. Diversified mining producers were another weak spot, held back by softening commodity prices. Iron ore fell 6.2 percent month on month (MoM).
Mobile operator MTN was amongst the best-performing JSE-listed companies rising19.5 percent MoM as it discussed plans for a value unlock, including separating its fibre and fintech units.
Retailer Shoprite was another star performer for March, up 18 percent MoM, as its earnings release showed the company’s African operations turning profitable and impressive cash generation across the group.
Tight supply in palladium saw the metal rally towards the all-time highs achieved pre-pandemic, up 13 percent MoM and helped drive JSE-listed platinum miners higher, up 11 percent MoM.
JSE-listed small- and mid-cap stocks also had a strong month as investors stepped back into smaller companies that have generally been shunned for the last few years.
The South African Reserve Bank (SARB) met during March, leaving rates unchanged, as expected, having seen February inflation data come in below expectations at 2.9 percent year on year and below the lower band of the SARB’s target range of 3 percent to 6 percent.
The SARB remained cautious on the country’s growth outlook, moderately increasing its 2021 economic growth forecast from 3.6 percent to 3.8 percent, with the prospect of a third wave of Covid-19 infections and constrained electricity supply weighing on output potential.
Despite supportive monetary policy and muted inflation expectations, South African government bond yields sold off during the month, tracking global rates higher.
South African 10-year government bond yields ended the month 0.5 percent higher at 9.5 percent causing the JSE All Bond Index to fall by 2.5 percent MoM.
The rand was the best-performing major currency for March, rallying 2.3 percent MoM against a generally strong US dollar.
Peter Little is a fund manager at Anchor Capital
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