South Africa’s (SA’s) FTSE/JSE Capped SWIX Index had its second-best month of the year (+3.6% MoM) in October, with strong contributions across the board, particularly from the materials stocks. Gold shares bounced back from a poor September and were up 23% in aggregate for October, taking their YTD performance to over 100%. Platinum shares rose 16% for the month and are now up 140% in aggregate YTD. Elsewhere, strong results from retailers, Clicks and Pick ‘n Pay saw their share prices rally 15% and 11% MoM, respectively. Local listings with UK exposure were buoyed at the prospect of a much-reduced risk of a no-deal Brexit, with Investec, Brait and Capital & Counties up 8%, 14% and 14%, respectively, for the month. Sasol shares also staged a small relief rally (+8% MoM) after the company released delayed results with no incremental bad news. Local Chinese-tech listing, Naspers, which has been the primary source of returns for the local market for the last few years, was the biggest drag for the month (-6% MoM), held back by a weak performance from its largest holding, Tencent (-3% MoM), and a slight de-rating after the much-hyped unbundling of EU-listed Prosus in September.
US dollar weakness helped boost emerging market (EM) currencies during the month. The rand was up 4% leading into the Medium Term Budget Policy Statement (MTBPS) and subsequently gave up most of these gains (+0.3% MoM) after Finance Minister Tito Mboweni’s speech projected a deteriorating fiscal position for the country with a lack of clarity on dealing with the problems at state-owned entities. The rand weakened 2.5% on the day and yields on the benchmark R186 government bonds spiked 0.35% on increased fears that a review of the country’s creditworthiness by Moody’s (the day after month-end) would lead to a downgrade into sub-investment grade (junk) status. SA ultimately hung onto its investment grade status, although the deteriorating fiscal trajectory was enough to cause Moody’s to put the rating on negative watch.