South African (SA) equity markets bounced back from a three-month losing streak in January (FTSE/JSE Capped SWIX Index +2.6% MoM). Miners had held the local bouse back in 4Q24 (-10% QoQ) but were responsible for most of the January gains (+16% MoM), particularly the precious metals miners (gold miners +33% MoM and platinum miners +20% MoM). Luxury conglomerate, Richemont (+31% MoM), was another star performer for the JSE, bolstered by a trading update that showed revenue growing 10% YoY in the most recent quarter, well ahead of expectations (+1% YoY). Cell phone companies MTN (+25% MoM) and Vodacom (+8% MoM) were another bright spot on the local bourse as the news of supportive tariff hikes by Nigerian regulators buoyed MTN. Shares geared to the performance of the domestic economy struggled in January (-2% MoM), taking a breather after a strong run in 2024. Clothing retailers were amongst the hardest hit in January (Mr Price and The Foschini Group -15% MoM, Truworths -17% MoM) as trading updates fell short of lofty expectations. Investment companies Naspers and Prosus (-5% MoM in aggregate) also disappointed in January, along with their largest underlying investment, Tencent (-5% in rand terms), after the US designated the Chinese tech conglomerate as a Chinese military company operating in the US.
The South African Reserve Bank (SARB) cut rates by 0.25% at its January meeting (as widely anticipated), lowering the prime lending rate to 11% p.a. This is the SARB’s third consecutive cut of 0.25%. Still, the country’s prime lending rate remains as high as it has been since 2009. The SARB’s meeting came in the wake of SA inflation coming in below expectations for the second consecutive month, leaving headline inflation (+3.0% YoY) at the bottom of the SARB’s target range and core inflation (+3.6% YoY), excluding the volatile food and energy prices, comfortably below the mid-point of the SARB’s target range for a sixth consecutive month.
The SA government’s 10-year funding rate ended January largely unchanged (10.4% p.a.), moving in synch with global funding rates, which climbed at the start of the month before retreating into month end. The local currency strengthened slightly against the US dollar (+1% MoM).
