South African Market Soars on Political Surprise
Strong gains for South African assets followed the formation of a unity government (GNU) after national elections. This defied expectations and boosted investor confidence.
- Domestic-focused sectors like retail, banks, and life insurance led the rally.
- The yield on South African bonds fell significantly.
- Resources and some property counters saw losses due to their offshore exposure.
Inflation remains steady, but administered prices pose a challenge for the central bank’s target. Rate cuts may still be on the cards, though the timing is uncertain.
Economic growth is expected to pick up as the new government settles in.
Global Markets See Positive Returns
Risk assets continued to deliver positive returns in Q2 2024, with some regional variations.
- US equities gained, driven by technology and financials. The Fed maintained a hawkish stance despite hopes for a soft landing.
- Eurozone shares declined amid political uncertainty and inflation concerns. The ECB cut rates, but further cuts may be limited.
- UK equities rose, with the FTSE 100 reaching new highs. The BoE kept rates unchanged due to wage inflation worries.
- Japanese equities gained in local currency terms but faced yen depreciation challenges.
- Emerging markets outperformed developed markets, with strong gains in Asia (particularly China and Taiwan).
Global bonds started weak but improved later in the quarter. High-yield markets continued to outperform.
Commodities saw modest gains, led by industrial and precious metals. Digital assets consolidated after a strong Q1, with regulatory progress offering a positive outlook.
Read more below in the Market Watch for June.
Missed last month and need to catch up? Read the May market watch here.