South Africa (SA) endured its first full month of lockdown in April after the initial three-week period was extended for two weeks and the country then moved to a phased re-opening at month-end with extremely limited additional economic activity. As risk appetite returned globally, SA equity markets were dragged along with the rising tide. The FTSE/JSE All Share Index was up 13% for the month (its best monthly return since 2003), with the bulk of the heavy lifting done by the resource shares. Gold miners were up over 50% in aggregate for the month, with platinum shares jumping 38% MoM, while beleaguered energy company, Sasol, was up 136% MoM (although this is still 70% below where its share price started the year). Naspers put in another solid month and with it Prosus is now up almost 30% YTD. The only major index components to disappoint in April were the food retailers and pharmacies which had a tough month after missing the initial sell-off in March. Clicks announced results, which were fairly robust given the circumstances, but it didn’t declare a dividend or provide its usual full-year guidance.
The South African Reserve Bank (SARB) delivered a 1% interest rate cut in April, following its 1% rate cut in March, bringing SA’s official interest rate to a record low of 4.25%. SA 10-year bonds saw their yield drop 0.7% to 10.3%, with foreign selling somewhat muted ($0.6bn for April) into SA’s much-anticipated month-end exit from the World Government Bond Index after March’s credit downgrade by Moody’s. In fact, foreigners sold almost six times as many bonds in the month leading into the downgrade than they did in the month since the downgrade. Despite limited foreign selling in local equity and bond markets and strong global risk appetite, the rand still managed to breach $19/$1 several times during April before ending 3.7% MoM weaker at R18.81/$1.