February local commentary: Weighed down by generally weaker commodity prices, miners drag the JSE lower

The JSE

The JSE ended February lower (FTSE/JSE Capped SWIX -2.3% MoM) despite a generally positive month for stocks geared to the domestic economy (banks +2% MoM, insurers +5% MoM), with the notable exception of the retailers (general- and discretionary retailers -5% MoM). The biggest drag on the local bourse came from the miners (-12% MoM), weighed down by generally weaker commodity prices (aluminium -10% MoM, gold -5% MoM, platinum -6% MoM and iron ore -1% MoM). Investment companies Naspers and Prosus were also a drag on the JSE for the month (-3% MoM in aggregate), though they fared considerably better than their biggest investment, Chinese tech conglomerate Tencent (-12% MoM). This was thanks, at least in part, to the impact of a weaker local currency, with the rand falling 5.2% MoM against the US dollar, bringing its YTD decline to 7.2% against the greenback (among the major currencies, only the Argentine peso has fared worse).

Find out more about the JSE’s stellar start to 2023 here.

 

February’s Comments:

February saw the hosting of two important addresses from the government, the first of which was President Cyril Ramaphosa’s State of the Nation speech, which included the declaration of a National State of Disaster and the announcement of a new minister for electricity – both measures in response to the dire state of the country’s energy supply. Later in the month, Finance Minister Enoch Godongwana delivered the 2023 Budget Speech, which continued a recent trend of fiscal responsibility to ensure a sustainable level of national debt. The budget speech brought no major surprises, though it revealed details on measures to address Eskom’s unsustainable debt levels and some incentives for individuals and corporates to deploy solar energy. Nevertheless, while the budget speech trumpeted gains made by the country in addressing the concerns of the Financial Action Task Force (FATF), these were not sufficient to deter the global financial body from placing South Africa on the “grey list”, resulting in increased financial monitoring and additional administrative burdens when interacting financially with the rest of the world.

On the economic front, South African January headline inflation eased to 6.9% YoY, while core inflation (excluding the volatile food and energy components) was unchanged at 4.9% YoY. Local government bond yields followed global yields higher, with 10-year government yields spiking by 0.85% during February to leave them comfortably back above 11% at month-end.

Find out more about our Global Economic comments for February here.

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