November local commentary: JSE has its best month in over two years

The Local Stock Market and The JSE

The local stock market had its best month in over two years (FTSE/JSE Capped SWIX +9.6% MoM) in November, dragging itself back into positive territory YTD (+7.4%) and leaving it as the second-best performing major global bourse YTD, lagging only India’s Nifty 50 (+9.6% YTD). A significant contribution to the stellar performance came from local investment companies Naspers and Prosus (both +39% MoM) as they benefitted from a massive rally in foreign-listed Chinese companies (their major underlying investment, Chinese tech conglomerate Tencent, was up 30% MoM). In addition, seemingly positive discussions between presidents Xi Jinping and Joe Biden at the G20 summit helped improve foreign sentiment towards Chinese investments, as did the prospect of easing COVID-19 lockdowns and the announcement of government support for the beleaguered Chinese property sector.

These factors were also seen as a tailwind for industrial metals (iron ore +22% MoM), which significantly boosted another meaningful component of the local bourse, the miners (+13% MoM). Local energy company, Sasol, was the only major disappointment amongst the commodity companies in November (-3% MoM) as it tracked the oil price lower (Brent crude -17% MoM in rand terms). The rest of the local market also fared relatively well, benefitting from improved global investor sentiment, including the domestic banks and insurers (+5% MoM).

Weaker-than-anticipated US inflation saw the US dollar reverse some of its recent strength, with the South African (SA) rand rallying 6.7% MoM against the greenback. Local inflation bucked the trend of softening US core inflation as SA core inflation accelerated, touching 5% YoY for the first time in over five years, perhaps justifying the SA Reserve Bank’s (SARB’s) mission to track developed market central bank tightening in an attempt to get ahead of local inflation. The SARB delivered a third consecutive 0.75% rate hike during the month, pushing rates to 7% for the first time since mid-2017. Despite the SARB hike, local 10-year government bond yields followed global yields lower, ending the month 0.5% down at 10.8%.

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