South African financial markets experienced a challenging month in May 2023, with the JSE All Share Index down 3.9% and the Capped SWIX index down 3.8%. The weakness was driven by a number of factors, including concerns about load shedding, allegations that South Africa may have sold weapons to Russia, and a weakening rand.
The load-shedding situation in South Africa has been deteriorating in recent months, with widespread power outages causing widespread disruption. This has led to fears of a potential grid collapse, which would have a significant impact on the economy.
The allegations that South Africa may have sold weapons to Russia have also weighed heavily on investor sentiment. If these allegations are proven true, it could have severe consequences for the local economy, including the loss of trade agreements with the US and possible sanctions from Western countries.
The rand has also weakened significantly in recent weeks, falling by 7.8% against the dollar and 4.7% against the euro. This has been driven by a number of factors, including the load shedding situation, the weapons allegations, and rising interest rates in the US.
The South African Reserve Bank (SARB) responded to the weakening rand by raising interest rates by 50 basis points in May. However, this is unlikely to be enough to prevent further rand weakness in the near term.
Overall, the outlook for South African financial markets in the near term is uncertain. The load shedding situation, the weapons allegations, and the weakening rand are all major risks that could weigh on investor sentiment.
To find out more about the current market situation, read the market watch for May 2023 below:
Missed last month and need to catch up? Read the March market watch here.
