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March 2024 market review: South Africa
The South African equity market rebounded in March, with the All-Share index posting a total return of +3.2%.
The South African equity market rebounded in March, with the All-Share index posting a total return of +3.2%. SA Listed Property and the All Bond index posted losses of -1.0% and -2.0% respectively over the month. Within the equity headline indices, Large Cap and Mid Cap stocks returned +4.1% and +2.3% respectively in March, while Small Caps posted a loss of 0.7%.
In terms of sector performance, SA Resources returned +12.8%, its best monthly performance since November 2022. SA Industrials gained 2.6% and SA Financials lost 3.0% over the month. Within SA Resources, top equity sector performance came from Precious Metals (+19.7%) with solid total returns coming from Harmony (+40.4%), Gold Fields (+22.4%), Implats (+20.9%) and Anglogold (+18.1%) driven by the rally in gold.
The outcome of South African elections to be held on 29 May and the make-up of coalitions (if any) create more uncertainty than the same time last year. For the last 30 years, SA has been a one-party-dominant state (the ANC). The expectation is that a host of new and smaller parties will eat away at the support of the existing big parties (ANC, DA, EFF).
All three of them are vulnerable. The known unknown is how much of the vote the ANC will get and, dependent on that, who will it partner with in a coalition if its support falls below 50%. The recent launch of the MK Party adds complexity to the range of outcomes. We are looking for policy continuity and certainty, while hoping for policy implementation and improvement.
The South African Reserve Bank (SARB) is scheduled to have its next meeting on May 30th, the day after the South African elections. The expectation is that rates will be maintained at 8.25% until September when the combination of lower SA inflation prints plus rate cuts from the UK, Europe, and the US should justify a rate cut from the SARB.
Inflation in South Africa spiked to 5.6% y/y in February, from 5.3% y/y in January and 5.1% y/y in December. The overshoot relative to the forecast for 5.5% y/y was mainly due to an even higher than expected jump in medical aid tariffs.
Core inflation was also marginally higher than expected, at 5% y/y. Expectations are for a moderation of food price increases. This, together with anticipated rate cuts (moderate) will be supportive of improved consumer demand in the latter half of the year.
As always, we remain committed to providing you with the best possible investment outcomes while remaining true our long term, well considered approach and making sure that portfolios are positioned appropriately for a variety of likely outcomes.
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