South African (SA) stocks did enough in December to push the local market into positive territory for 2020 (FTSE/JSE Capped SWIX Index +5.5 MoM and +0.7% for 2020). Most sectors contributed positively, the exception being the Naspers/Prosus complex, which were unable to overcome a strong currency headwind (the rand was up 5.3% MoM vs the US dollar) and negative sentiment around Chinese tech heavyweights (which came under scrutiny from Chinese anti-trust regulators). Still, despite a disappointing end to the year, Naspers and Prosus’ combined performance for 2020 resulted in a 37% gain, contributing 5.4% to the FTSE/JSE Capped SWIX Index performance for 2020.
Mining companies were up across the board, with platinum miners (+21% MoM and 47% higher for 2020) leading the way on the back of another strong performance from platinum group metals. Mining shares rose by 19% in aggregate for 2020, contributing 6% to the FTSE/JSE Capped SWIX Index. SA Inc. shares, sensitive to the domestic economy, also had a good month, particularly the local banks, which rose 8.8% MoM, although that was not nearly enough to put these counters into positive territory for the year as SA Inc. shares ended the year 16% weaker. It was hard to find a counter amongst that group which recorded gains for the year, with the exceptions being Discovery, Vodacom, Shoprite, and Multichoice (up 29%, 15%, 14% and 22%, respectively, for 2020).
Local property shares also had a strong end to 2020 (FTSE/JSE SA Listed Property Index +13.7% MoM), though like the other SA Inc. shares, this too was not nearly enough to turn a forgettable year positive as the index closed 2020 down 34% and it remains 50% below the peak reached at the end of 2017.
The SA rand’s strong rally into year-end capped a 30% claw back from its April lows against the US dollar, but nevertheless still saw it end the year 4.7% down. SA 10-year government bond yields also staged a strong fight back into year-end, with yields dropping 0.25% in December to close 2020 at 8.74% – also a remarkable recovery from the 12.38% yield seen in March. The strong recovery in local assets comes as the local economy is forecast to shrink by 8% for the year, but also comes in an environment where lacklustre inflation has allowed the SA Reserve Bank to provide plenty of monetary stimulus in the form of record-low interest rates, which ended 2020 at 3.5% as a result of 3% in cumulative rate cuts for the year.