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June local commentary: The JSE rebounds in June

June local market and economic commentary.

The local bourse rallied strongly in June (FTSE/JSE Capped SWIX Index +3.8% MoM), dragging itself back into positive territory for the first half of the year (+3.7% YTD). Companies geared to the domestic economy were the strongest performers, with the banks (+13% MoM), insurers (+11% MoM), general retailers (+13% MoM) and discretionary retailers (+17% MoM) all delivering double-digit returns in June. While this June rally was enough to drag the bulk of the domestically focused companies into positive territory YTD, the retailers (arguably hardest hit by the country’s electricity supply challenges) ended 1H23 with their share prices down in aggregate. The rand bounced back from its 7.3% MoM collapse in May, rallying by 4.7% against the US dollar in June as the prospect of sanctions related to allegations of supplying arms to Russia receded.

Miners were the biggest drag on the local bourse’s performance (-9% MoM), primarily due to the precious metal miners. Platinum miners (-21% MoM) continued to be one of the weakest parts of the local market (-36% YTD), with platinum and palladium prices down 9% and 10% MoM, respectively, and the rhodium price down 38% MoM, having lost almost two-thirds of its value YTD. Gold miners (-15% MoM) gave back some of their impressive YTD gains in June, but despite this, they are still responsible for half of FTSE/JSE Capped SWIX performance in 1H23.

South Africa’s (SA’s) latest inflation data for May fell for the second consecutive month (6.3% YoY), coming in below expectations, while the core inflation basket (5.2% YoY) also saw price gains slow slightly. Inflation remains above the South African Reserve Bank’s (SARB’s) 4.5% target, and investors anticipate that the SARB will need to increase rates by c. 0.5% over the next few months as it continues to fight inflation.

SA’s 10-year government bond yield fell by 0.7% during June, leaving it at 11.8% at month-end, still extremely elevated relative to history but below the panic level it got to in May around the time of peak concern related to allegations of SA supplying weapons to Russia.

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WEBINAR | The Navigator – Anchor’s Strategy and Asset Allocation, 2Q24

Anchor CEO and Co-CIO Peter Armitage will host the webinar, provide an introduction to current global and local market conditions and give his thoughts on offshore equities. Together with Head of Fixed Income and Co-CIO Nolan Wapenaar, Pete will also discuss Anchor’s strategy and asset allocation for 2Q24, focusing on global equities and bonds. In addition, Fund Manager Liam Hechter will provide insights into local equities, highlighting some investment ideas; Global Equities Analyst James Bennet will discuss Ferrari and give an update on Tesla, and finally, Analyst Thomas Hendricks will participate in a Q&A with Peter, explaining the 10-year US Treasury to attendees.