Market Watch for May 2024

South African markets see mixed performance in our market watch for May 2024.

Equities: While developed markets rebounded, emerging markets lagged behind. South Africa, however, defied the trend with its FTSE/JSE All Share Index gaining a significant 4.5% (USD) over the past two months. This positive sentiment was fuelled by the failed BHP bid for Anglo American, which exposed a pricing disparity, and by companies with strong China ties like Naspers/Prosus and platinum producers.

Bonds: South African bond yields mirrored global trends, initially dipping before rising slightly by month-end. The election also caused volatility, with the 10-year yield experiencing a sharp swing within a two-day period. Inflation-linked bonds were the worst performers due to declining inflation and ongoing fiscal uncertainty.

Property: The South African Listed Property Index saw modest gains in the first few weeks of May but ultimately lost most of those by the month’s end. M&A activity within the sector was evident, with Vukile and Newriver expressing interest in acquiring Capital and Regional, a subsidiary of Growthpoint.

Election: The recent election delivered a significant drop in support for the ANC, reflecting a potential shift in accountability for governance. However, a concerning trend emerged with voter turnout falling to 58.6%, particularly low among young demographics. This disengagement could have future implications for leadership selection.

Interest Rates: The South African Reserve Bank (SARB) maintained the repo rate at 8.25%, signalling a more balanced outlook on inflation. Their revised forecast predicts inflation to stabilise at 4.5% by the second quarter of 2025, potentially paving the way for rate cuts later in the year.

Inflation: Headline year-on-year inflation moderated to 5.2% in April, with core inflation following suit at 4.6%. This slowdown was primarily driven by declining food inflation and favourable base effects. However, rising petrol prices continue to exert upward pressure on transport costs.

Economic Growth: Despite initial positive momentum, data suggests the South African economy stagnated in the first quarter of 2024, with declines in motor trade sales, mining output, and manufacturing production. However, optimism remains for the latter part of the year with Purchasing Managers’ Index (PMI) readings exceeding 50 and expectations of post-election stability boosting investor and consumer confidence. Additionally, reduced load-shedding and increased private sector power generation offer a promising step towards more reliable electricity supply, a crucial factor for sustained economic growth.

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