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October local commentary: JSE follows global markets higher

The JSE Follows The Global Markets Higher

The South African (SA) stock market followed global equity markets higher in October (FTSE/JSE Capped SWIX +5.3% MoM), with most parts of the domestic market contributing positively. The main area of disappointment came from investment companies Naspers and Prosus (both down 16% MoM), dragged lower by their main underlying investment, Chinese tech company Tencent (-22% MoM in rand terms). This, as the share prices of foreign-listed Chinese corporates, plunged in the wake of the Chinese Communist Party’s congress as foreign investors baulked at the trajectory that China’s top leadership is taking. President Xi Jinping cemented a much-anticipated third, five-year term in office, though with an unexpectedly aggressive consolidation of power as he packed the country’s senior leadership (the seven-member Politburo Standing Committee) with loyalists and moved to oust those deemed more moderate.

Other areas of weakness for the month were Telkom (-21% MoM), as MTN appeared to walk away from a deal to acquire it, and Thungela (-13% MoM), as the local bourse’s top-performing share YTD showed signs of weakness in the face of a 24% drop in the price of export coal. The banks were amongst the best-performing sectors in October (+16% MoM), led higher by Investec (+27% MoM) as the announcement of share buybacks helped it recover strongly from a disappointing September. Encouraging results from Standard Bank helped buoy its share price (+20% MoM). Listed real estate also fared well last month (+11% MoM). Despite lacklustre metal prices in October (iron ore -14% MoM), miners fared reasonably well, with the platinum miners (+9% MoM) helped by higher platinum prices (+8% MoM), while Glencore (+11% MoM) was up on the back of a decent production update and Sasol (+8% MoM) followed the oil price (+8% MoM) higher.

On the economic front, headline inflation (+7.5% YoY) dropped for a second consecutive month. However, core inflation (excluding the volatile food and energy categories) drifted higher (+4.7% YoY), edging above the midpoint of the South African Reserve Bank’s (SARB’s) target (4.5%) as inflation showed signs of spreading beyond food and energy prices. Finance Minister Enoch Godongwana delivered a prudent medium-term budget policy statement (MTBPS) during the month, showing fiscal restraint despite better-than-expect tax receipts. South African 10-year bond yields ended the month unchanged, at already elevated levels (11.3%) despite global yields generally pushing higher during the month. The local currency fell further against the US dollar during October (-1.5% MoM), leaving it 13% weaker against the greenback YTD despite weakening only 2% in the first half of the year.

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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.