South African (SA) equities had a second consecutive month as one of the top-performing major emerging markets (EMs) in July (FTSE/JSE Capped SWIX Index +4.1% MoM), as the momentum from post-election optimism carried into a second month. Stocks geared to the domestic economy were once again a meaningful contributor to performance, with the banks and general retailers (both +6% MoM) boosting the local bourse’s performance. Investment conglomerates Naspers and Prosus (-2% MoM) weighed on performance for a second consecutive month as sentiment towards foreign-listed Chinese stocks remained negative. China’s economic data continue to underwhelm, and despite some recent monetary stimulus from the country’s government, consumer confidence and spending remain depressed. Unlike in June, when miners dragged on index performance, that cohort delivered a positive contribution to the JSE in July (+5% MoM). The gold and platinum miners (+14% and +8% MoM, respectively) more than compensated for a disappointing performance from the diversified miners. A c. 8% MoM fall in the price of iron ore weighed on diversified miners, while gold miners were buoyed by a rising gold price, with the yellow metal up 5% MoM and 19% YTD.
After a 3.3% MoM rally against the US dollar in June, the local currency took a breather in July (-0.1% MoM) and, as such, had minimal impact on the performance of the JSE-listed counters with predominantly foreign earnings. British American Tobacco (+14% MoM) was a standout performer amongst the foreign earners for the month as its lacklustre results were marginally better-than-anticipated, and the company’s management remained confident that 1H24 headwinds were largely cyclical and would reverse in 2H24. The tobacco company was on a 6.5x forward price/earnings multiple going into the month and likely also benefitted from a global rotation which saw investors favour value stocks in July.
The SA government’s 10-year borrowing rate fell below 11% p.a. in July for the first time since early 2023 (at which point the US government’s 10-year borrowing rate was well below 4% p.a.). The 0.5% drop in SA 10-year government bond yields during July largely tracked the fall in global bond yields and helped the JSE All Bond Index to a 4% MoM return, with the index now up 9.4% since the start of June. Despite the latest inflation data for SA continuing to show slowing core price growth, which registered at the midpoint of the SA Reserve Bank’s (SARB) target range for June (4.5% YoY), the SARB kept rates at 8.25% p.a., the same level they have been since early 2023 and the highest level since 2009.
