Market Watch for January 2024

South African Economy Starts 2024 on a Weak Footing, But Hope Remains

South Africa’s stock market kicked off 2024 with a decline, but there are signs that the economy may be avoiding a recession. The FTSE/JSE All Share Index fell 2.9% in January, driven by a 6.6% drop in the resource sector. However, the luxury goods sector performed well, with Richemont gaining 11%.

Interest rates are likely to remain on hold for now, as inflation is still above the target range. The South African Reserve Bank (SARB) kept rates unchanged at 8.25% in January, and Governor Lesetja Kganyago said that cuts are unlikely until inflation shows a sustained decline towards the 4.5% target.

The economic outlook is mixed. On the one hand, data for November suggests that the economy may have grown after contracting in the third quarter of 2023. On the other hand, state-owned enterprises continue to underperform, and the government is struggling to control its spending.

Looking forwards and upwards with optimism, however, global growth appears to be picking up, and this could bode well for South Africa’s export-oriented economy. Additionally, some of South Africa’s emerging market peers have already started cutting interest rates, which could lead to lower borrowing costs for South African businesses and consumers.

Overall, the South African economy is facing some challenges, but there are also some positive signs. Investors will be watching closely to see how the budget plays out and whether the economy can continue to grow.

To find out more about the current market situation, read the Market Watch for January 2024 below:

Missed last month and need to catch up? Read the December market watch here.