South African (SA) equity markets delivered a sixth consecutive positive monthly return (FTSE/JSE Capped SWIX Index +3.5% MoM), leaving the local bourse 22.3% higher YTD. It was another strong month for the gold miners (+22% MoM) as they followed the price of the yellow metal higher (gold +4.8% MoM). Gold miners were responsible for three-quarters of the JSE’s return in August and, together with their precious metal peers, the platinum miners, contributed more than half of the JSE’s YTD performance.
Other outsized moves on the JSE came from education company, Curro (+34% MoM), as the charitable foundation set up by PSG Group founder, Jannie Mouton, made a R7.2bn bid for the company. The aim is to delist Curro and convert it into a non-profit organisation to expand access to quality education. In the banking sector, Standard Bank’s results were well received, with the stock ending the month 6% higher. The results showed its African operations accounting for c. 40% of Group earnings and driving strong earnings growth. At the other end of the spectrum, Nedbank (-9% MoM) delivered disappointing results, with normalised headline earnings growing just 2.6% YoY. The Foschini Group (-12% MoM) was another laggard on the local bourse as it delivered a disappointing trading update and left investors sceptical of the management’s ability to execute a complex, multi-year transformation plan across three continents that was presented at the company’s capital market day. Discretionary retail peer, Truworths (-15% MoM), also delivered disappointing results in August with adjusted headline earnings for its financial year to 30 June falling 3.4% YoY relative to consensus expectations for 2.2% growth.
The country’s latest inflation data ticked up (core inflation +3.0% in July YoY vs 2.9% YoY in June), while headline inflation (including the volatile food and energy components), at +3.5% YoY, reached its highest level in almost a year. This was as a result of food inflation, particularly beef (+10.5% YoY), which is experiencing disruptions from the country’s foot-and-mouth disease outbreak. Despite the uptick in inflation, the government’s 10-year borrowing rate (9.6% p.a.) fell slightly during the month, benefitting from lower global yields and leaving it at an almost four-year low. The rand (+3.2% MoM) rallied against a weak US dollar, leaving the local currency +6.7% YTD.
