The South African (SA) stock market followed global equity markets lower (FTSE/JSE Capped SWIX Index -4.8% MoM), leaving local equities only slightly positive YTD (+2.8% YTD). Mining stocks were the biggest drag on the JSE in August (-9% MoM) as weak Chinese economic activity weighed on metal prices. Platinum miners were by far the worst of a bad bunch (-20% MoM) as the major platinum miners all reported disappointing results characterised by weak volumes and elevated costs. Investment conglomerates Naspers and Prosus (-8.2% MoM in aggregate) also weighed heavily on the local bourse, as their largest underlying investment, Chinese tech conglomerate Tencent, fell 7.3% MoM in Hong Kong dollar terms.
British American Tobacco (+4.9% MoM) and AB InBev (+5.5% MoM) were amongst the biggest positive contributors to the JSE’s performance in August, thanks in large part to the currency tailwind (the rand fell 5.4% MoM against the US dollar). Despite the poor month for stocks, some of the local blue-chip financial counters eked out a positive performance in August (FirstRand +0.8% MoM, Investec +3.2% MoM, Standard Bank +1.2% MoM and Sanlam +3.6% MoM). Local education companies were also a rare bright spot after releasing strong results with solid double-digit earnings growth (Stadio +20% MoM, Curro +16% MoM and ADvTECH +11% MoM).
SA inflation data showed price growth slowing faster than anticipated to 4.7% YoY in July (relative to expectations for a 4.9% YoY print) as inflation slowed towards the mid-point of the SA Reserve Bank (SARB) range, reaching the lowest level in two years. Despite slowing domestic inflation, concerns around the prospects of continued global central bank tightening dominated local yield fluctuations. As US 10-year rates hit a 16-year high mid-month, SA 10-year government bond yields pushed above 12% p.a. before settling at 11.7% p.a. at month end. While all major currencies (except for the Turkish lira) were weaker against the US dollar in August, the rand’s 5.4% MoM decline was only topped by the Argentine peso (-19.4% MoM), and it leaves the local currency down 9.6% YTD.
