Peter Little
South African equity markets bounced back from a three-month losing streak in January with the FTSE/JSE Capped SWIX Index up 2.6% month on month (m/m).
Miners had held the local bourse back in the fourth quarter of 2024 at -10% quarter on quarter, but were responsible for most of the January gains, rising 16% m/m, particularly the precious metals miners (gold miners +33% m/m and platinum miners +20% m/m).
Luxury conglomerate, Richemont, which was up 31% m/m, was another star performer for the JSE, bolstered by a trading update that showed revenue growing 10% year on year (y/y) in the most recent quarter, well ahead of expectations (+1% y/y).
Cellphone companies MTN rose 25% m/m and Vodacom, up 8% m/m, were another bright spot on the local bourse as the news of supportive tariff hikes by Nigerian regulators buoyed MTN.
Shares geared to the performance of the domestic economy struggled in January (-2% m/m), taking a breather after a strong run in 2024. Clothing retailers were amongst the hardest hit in January (Mr Price and The Foschini Group -15% m/m, Truworths -17% m/m) as trading updates fell short of lofty expectations.
Investment companies Naspers and Prosus, down 5% m/m in aggregate, also disappointed in January, along with their largest underlying investment, Tencent sliding 5% in rand terms, after the US designated the Chinese tech conglomerate as a Chinese military company operating in the US.
The South African Reserve Bank (SARB) cut rates by 0.25% at its January meeting (as widely anticipated), lowering the prime lending rate to 11% per annum. This is the SARB’s third consecutive cut of 0.25%. Still, the country’s prime lending rate remains as high as it has been since 2009. The SARB’s meeting came in the wake of SA inflation coming in below expectations for the second consecutive month, leaving headline inflation up 3.0% y/y at the bottom of the SARB’s target range and core inflation of + 3.6% y/y, excluding the volatile food and energy prices, comfortably below the mid-point of the SARB’s target range for a sixth consecutive month.
The SA government’s 10-year funding rate ended January largely unchanged (10.4% p.a.), moving in synch with global funding rates, which climbed at the start of the month before retreating into month end. The local currency strengthened slightly against the US dollar, up 1% m/m.
Peter Little is a fund manager at Anchor Capital
BUSINESS REPORT