February Local Commentary: The JSE delivers another negative monthly performance

The South African (SA) stock market found itself in ignominious company in February, alongside the Spanish bourse and the UK mid-cap index, as the only major stock market indices to deliver a negative performance for the month (FTSE/JSE Capped SWIX Index -2.3% MoM). A raft of earnings announcements and trading updates mainly delivered disappointing news for shareholders. The bourse’s strongest performer, Multichoice (+39% MoM), was buoyed by the announcement of a buyout offer from French media company Vivendi Canal+. Still, outside of that, there was very little to get excited about, perhaps with the exception of global luxury goods company Richemont (+9% MoM). Miners (-7% MoM) were the biggest drag on performance as falling commodity prices put pressure on earnings. Platinum miners (-12% MoM) were amongst the worst performers as trading updates revealed how much falling platinum group metal (PGM) prices weighed on earnings. Sasol (-12% MoM) also delivered extremely disappointing results, including news that the energy company would need to slash its dividend. Pick n Pay (-14% MoM) added to the slew of bad news with a poor trading update (sales down 0.1% for the 47 weeks to 21 January 2024) and the announcement of plans to shore up its balance sheet with a R4bn equity raise and the sale of its Boxer business.

National Treasury tabled the country’s latest budget in Parliament in February, which remained fairly prudent with regard to spending growth as a sluggish economy fails to deliver meaningful growth in tax receipts. Possibly the most noteworthy announcement related to plans to reduce the pressure on government borrowing by R150bn over the next three years via the release of a portion of the SA Reserve Bank’s (SARB’s) Gold and Foreign Exchange Contingency Reserves.

Yields on the government’s 10-year bond crept slightly higher during February, though with most of the increase explained by a generally higher global yield environment. SA’s latest inflation data saw January core CPI drift marginally higher to 4.6% YoY, though still comfortably around the SARB’s target range midpoint of 4.5%. The rand (-2.7% MoM) struggled against a stronger US dollar in February, finding itself amongst the worst-performing EM currencies during the month, with only the Turkish lira (-2.9% MoM) and the Chilean peso (-3.7% MoM) faring worse.

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