Local Market Overview
South African markets had a turbulent start to 2025, with fears of US tariffs on emerging markets weighing on investor sentiment. While the All Share Index (ALSI) gained +2.3%, this masked struggles among domestically focused stocks such as retailers, insurers, and banks. The index was supported by strong performances in resources (gold and platinum miners) and standout stocks like Richemont (+31%), MTN (+25%), and Vodacom (+8%).
Luxury giant Richemont surged on the back of 10% year-on-year revenue growth, far exceeding expectations. MTN benefited from Nigerian tariff hikes, while Vodacom gained from overall sector strength.
Conversely, domestic stocks declined 2%, following a strong 2024. Clothing retailers—Mr Price, The Foschini Group, and Truworths—fell 15%-17% after disappointing trading updates. Naspers and Prosus (-6%) also struggled, mirroring Tencent’s losses, which stemmed from its designation as a Chinese military-linked company by the US government.
Fixed Income, Currency & Economic Outlook
The rand and SA bonds (+0.4%) saw early weakness but recovered mid-month as US trade concerns eased. However, renewed worries over Government of National Unity (GNU) stability and load shedding led to late-month volatility.
The SARB cut the repo rate by 25bps to 7.5%, though a split decision highlighted inflation concerns. While inflation cooled to +3% YoY, the SARB warned of rising risks, including a potential rand depreciation to R21/$ and a 5% inflation rate in a trade war scenario.
Recent data was mixed—ABSA PMI (46.2) and S&P SA PMI (49.9) declined, but the SARB’s Leading Indicator pointed to gradual economic recovery in the coming months.
Global Market Overview
Global markets opened 2025 with major shifts driven by geopolitics, inflation, and AI disruption. European equities led the way, with the MSCI Europe ex-UK Index up 7.1%, significantly outpacing the S&P 500’s 2.8% gain. The UK’s FTSE 100 (+6.2%) hit an all-time high, helped by a weaker sterling and easing inflation concerns.
The US market saw mixed results. Nvidia’s $600 billion market cap loss on 27 January—the largest single-day decline in US history—sent shockwaves through the tech sector after Chinese AI firm DeepSeek unveiled low-cost, high-efficiency AI models. However, Trump’s proposed tax cuts and deregulation lifted consumer and financial stocks, offsetting some of the tech weakness.
Asian markets saw varied performance. China posted modest gains, supported by improved domestic data, while Japan (+0.1%) struggled as the BoJ raised rates. India (-3.5%) lagged due to weak earnings and economic concerns.
Fixed Income & Commodities
Global bonds were volatile, but US Treasuries (+0.5%) and UK gilts (+0.8%) outperformed amid easing inflation fears. High-yield debt gained, with US high-yield bonds up 1.4%, while emerging market debt rose 1.2% on a weaker dollar.
Commodities surged, with gold hitting $2,865/oz on safe-haven demand, while oil prices climbed due to harsh winter conditions and US sanctions on Russia.
Conclusion
January 2025 highlighted risks in concentrated US tech markets, geopolitical uncertainty, and AI-driven disruption. Diversification and active risk management remain crucial, with bonds and alternatives playing a key role in mitigating volatility.
Read more below in the Market Watch for January.
Missed last month and need to catch up? Read the December market watch here.
