The JSE fell just short of delivering a positive return for investors in May (FTSE/JSE Capped All Share -0.3%), with its lack of exposure to the AI chipmaking counters that drove the majority of investor returns last month. The local bourse ended May still marginally in positive territory for the year (+0.9% YTD), though well behind the emerging market (EM) index (MSCI EM +9.7% MoM/+25.7% YTD), with the index’s YTD performance almost entirely attributable to three Asian chipmaking stocks (SK Hynix +245% YTD, Samsung +155% YTD and TSMC +53% YTD). The rising gold price, which had provided a meaningful tailwind to JSE performance over the past couple of years, has turned into a headwind recently, with the precious metal’s price (-1.7% MoM) falling for a third consecutive month, causing the gold miners to shave 0.5% off index performance in May.
Investment conglomerates Naspers and Prosus were also a drag on JSE performance in May (down 6% MoM in aggregate), dragged lower by a 7% MoM decline from their largest investment, Chinese tech conglomerate Tencent, which struggled alongside other Chinese tech shares as investors questioned the AI monetisation strategy for the companies. Luxury goods company, Richemont (+11% MoM), was one of the positive contributors on the JSE in May as its recent results showed the jewellery division still executing well. FirstRand (+4.7% MoM) and Capitec (+4.4% MoM) were also amongst the positive contributors to the JSE’s May performance.
The rand was one of the strongest major currencies in May, up 2.7% MoM against a US dollar that was stronger against most of the other major currency pairs. The rand’s strength puts it back into positive territory against the greenback YTD (+2.1%). The local currency’s performance was boosted by a much-anticipated rate hike from the South African Reserve Bank (SARB), which hiked rates 0.25% as it attempts to get ahead of the potential inflationary impact of higher energy prices caused by the Iran war. The rate hike is the SARB’s first hike since mid-2023 and pushes the prime lending rate to 10.5% p.a.
SA’s latest inflation print (+4% YoY) saw the price gauge touch 4% for the first time since 2024 as the impact of higher energy prices started to flow through into the data. The SA government’s 10-year borrowing rate fell to 8.6% p.a. during May, defying a global trend of generally higher bond yields.
