South African (SA) stocks carried their strong momentum from March into April (FTSE/JSE Capped SWIX Index +2.9% MoM), dragging the local bourse into positive territory for the year (+0.6% YTD). Anglo American ([Anglo]; +33% MoM) was responsible for almost 40% of the index return in April as it became the acquisition target of diversified mining peer BHP Group. BHP’s offer valued Anglo at c. US$39bn, which the Anglo directors rejected as “significantly undervaluing” the company. BHP is said to be considering an improved offer. Another significant contribution to the JSE’s performance in April came from investment conglomerates Naspers and Prosus (+7% MoM), whose biggest underlying investment, Chinese tech conglomerate Tencent (+14% MoM), rallied as it benefitted from strong momentum in Chinese shares. Tencent was further boosted by announcing an earlier-than-anticipated debut of one of the year’s most eagerly awaited mobile games.
Shares geared towards the SA economy fared relatively well in April (+2% MoM in aggregate) as they bounced back after a disappointing March when pessimism around the upcoming SA elections seemed to peak. Capitec (+11% MoM) was a standout performer amongst domestically geared stocks as it released FY24 earnings, which were up 15.6% YoY (towards the top end of their guided range), with its active customer base having grown to more than 22mn. April also saw a new listing on the JSE in the form of We Buy Cars, which was spun out of Transaction Capital. By the end of the month, the combined value of the We Buy Cars and Transaction Capital shares was roughly 6% ahead of the March month-end value of Transaction Capital shares.
Shares with predominantly non-SA earnings (-4% MoM) were a drag on local equity market returns, weighed down by the poor developed market (DM) equity market performance and a currency headwind. The rand strengthened against the US dollar (+0.5% MoM), finding itself alongside the Chilean peso as one of only two major currencies to strengthen against a generally strong US currency in April.
SA’s latest core inflation data was in line with expectations as core inflation (+4.9% YoY) dipped back below 5%, nudging closer to the SA Reserve Bank’s 4.5% target mid-range. In another sign of reducing pessimism about the outcome of SA’s upcoming elections, the SA government’s 10-year borrowing rate ended the month at 12.2%, marginally lower MoM as the domestic rates market defied a global environment where yields generally pushed higher for the month.
