March local commentary
The JSE was among a minority of major global markets that ended March lower (FTSE/JSE Capped SWIX Index -1.9% MoM) though it performed well enough to remain in positive territory for the quarter (+2.5% QoQ). Companies geared towards the domestic economy were among the worst-performing, with many flagging the impact of increasing costs related to operating under the country’s severe loadshedding conditions. JSE-listed banks were dragged lower as confidence in the global banking system waned on the back of the failure of three US banks and the Swiss National Bank’s forced consolidation of its two banking behemoths, UBS and Credit Suisse, in a bid to rescue the latter from failure. With its meaningful offshore presence, Investec was amongst the hardest hit (-16% MoM). Transaction Capital was another casualty of slowing local economic activity as its trading update flagged major challenges in its taxi finance division (which it expects to persist) that would require a meaningful restructure. At the same time, its used car dealership network, WeBuyCars, was also impacted by increasing margin pressure. The counter was the worst performing on the JSE for March (-59% MoM).
Aspen (+29% MoM) was amongst the local bourse’s best performers, as its results were accompanied by an upgraded outlook for 2H23. Gold shares were by far the JSE’s biggest positive contributors (+41% MoM) and the only sector of the mining industry to deliver positive results in March, buoyed by an 8% MoM rally in the gold price. Investment conglomerates Naspers and Prosus were also among the few positive performers on the JSE in March – up 2% MoM in aggregate. However, they lagged the performance of their largest investment, Chinese tech conglomerate Tencent (+9% MoM in rand terms).
Local economic data released in March was generally worse than anticipated. Headline inflation (+7% YoY) and core inflation (+5.2% YoY) both came in ahead of expectations and higher than the previous print. This was enough to spook the South African Reserve Bank (SARB) into delivering a larger-than-expected 0.5% rate hike in March. 4Q22 economic growth also came in below expectations (-1.3% QoQ vs expectations for -0.4% QoQ).
Despite the larger-than-expected rate hike, South African 10-year government bond yields ended the month marginally lower (11.1%) as they benefitted from a fall in global bond yields. The rand benefitted from a combination of a weaker US dollar and the SARB rate hike surprise to end the month 3.2% stronger against the US currency.
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