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August local commentary: Banks outperform, but Naspers/Prosus and diversified miners weigh on the JSE

August was another solid month for the South African (SA) equity market (FTSE/JSE Capped SWIX +2% MoM) with the local bourse ending the month 20% higher YTD when measured in US dollar terms. Stocks geared towards the domestic economy were the stars of the show in August (+12% MoM), as a slew of results showed the companies comfortably exceeding expectations. Local banks were amongst the best performers with the FTSE/JSE SA Banks Index up 15% MoM as earnings reports showed that local banks were able to unwind impairments much faster than initially expected, with credit losses tracking well below expectations. This even though 2Q21 employment data, released during the month were worse than expected, with the unemployment rate setting another record high of 34.4%. The rand was marginally stronger against the US dollar in August (+0.6% MoM) which added to the woes of the largest domestically listed companies with predominantly ex-SA earnings.

The world’s biggest brewer, Anheuser-Busch Inbev was down 4% MoM as the prospect of significantly higher costs for commodity inputs weighed on earnings expectations. Global luxury goods company, Richemont, fared significantly worse (-14% MoM) as media in the luxury sector’s biggest market, China, reported that President Xi Jinping suggested it might be necessary to “reasonably regulate excessively high incomes” in the search for “common prosperity”. Uncertainty around the shifting Chinese regulatory environment also continued to weigh on local index heavyweights, Naspers and Prosus, as Chinese gaming company, Tencent, their largest underlying investment, dropped into month-end on reports that Chinese regulators would rachet up the regulatory restrictions on youth gaming. During August, investors were also given the opportunity to exchange Naspers shares for those of Prosus in the latest attempt by management to try and compress the deep discount the companies trade at relative to the value of their underling investments. The exercise helped Prosus (-2.7% MoM) significantly outperform Naspers (-12.1% MoM) in August.

Miners were also a drag on the local bourse last month as the price of diversified miners followed iron ore lower, but some of the biggest declines were amongst the platinum group miners. The prices of platinum (-3.4% MoM), palladium (-7.2% MoM), and rhodium (-4.9% MoM) all fell, as shortages of memory chips continued to weigh on vehicle product with Toyota the latest motor manufacturer to announce production cuts (of up to 40%) for September. SA government bond yields initially followed global yields higher but drifted lower to end the month largely unchanged as inflation data came in below expectations, likely through the worst of the transitory spike, and removing any pressure for the SA Reserve Bank to hike rates imminently.



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WEBINAR | The Navigator – Anchor’s Strategy and Asset Allocation, 2Q24

Anchor CEO and Co-CIO Peter Armitage will host the webinar, provide an introduction to current global and local market conditions and give his thoughts on offshore equities. Together with Head of Fixed Income and Co-CIO Nolan Wapenaar, Pete will also discuss Anchor’s strategy and asset allocation for 2Q24, focusing on global equities and bonds. In addition, Fund Manager Liam Hechter will provide insights into local equities, highlighting some investment ideas; Global Equities Analyst James Bennet will discuss Ferrari and give an update on Tesla, and finally, Analyst Thomas Hendricks will participate in a Q&A with Peter, explaining the 10-year US Treasury to attendees.