South African (SA) equities extended their post-election rally, with the FTSE/JSE Capped SWIX Index (+4% MoM) now up 16% YTD, with most of that performance coming in the four months since the country’s elections in May. The raft of stimulus measures announced in China gave the local bourse a major boost via Chinese tech conglomerate Tencent (+16% MoM), which remains the single largest investment for local investment companies Naspers and Prosus (which were both up 14% MoM). Miners also helped boost the JSE’s performance, particularly diversified miners (+10% MoM), which benefitted from higher industrial metal prices. China’s stimulus announcements also buoyed industrial metals. Platinum miners benefitted from early signs that platinum group metals (PGM) might be bottoming. Implats (26% MoM) was the best-performing platinum miner, bouncing back from a tough August (-17% MoM). Aspen was the worst-performing JSE counter (-17% MoM) as its FY24 results fell well short of the company’s guidance.
The SA Reserve Bank (SARB) delivered its first interest rate cut since early 2020, dropping the repo rate by 0.25% to 8%. The country’s prime lending rate tracked the repo rate lower, leaving it at 11.5% p.a. after the cut. While the 0.25% rate cut had been anticipated, it was perhaps disappointing coming a day after the US central bank (Fed) cut rates by a larger-than-expected 0.5%. The SARB’s conservative rate cut was also in the wake of SA’s most recent inflation data, which saw core price gains (4.1% YoY) slow to further below the SARB’s target range mid-point (4.5% YoY).
The softening global interest rate environment, alongside increasing optimism for SA economic activity, helped ease the SA government’s 10-year borrowing rate towards 10% p.a. at the end of September. That borrowing rate has dropped by c. 2.5% in the past few months. US dollar weakness in the face of softening US rates and an overly cautious SARB helped push the local currency to its strongest level in almost two years against the US dollar, finishing September at R17.26/US$1 (+3.2% MoM). The rand is now 6.3% stronger against the greenback YTD. Amongst the major currencies, only the Malaysian ringgit (+11.4% YTD) has fared better against the US currency in 2024.
