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January local commentary: Renewed optimism around China buoys the JSE

Local Economic Commentary For January

The JSE followed global markets higher (FTSE/JSE Capped SWIX +7% MoM), thanks mainly to renewed optimism around China’s economic growth prospects. The most direct impact of Chinese optimism fed through to the share prices of Naspers and Prosus (both +18% MoM), while luxury retailer Richemont (+18% MoM) rallied in the wake of a 4Q22 trading update that disappointed based on worse-than-expected sales in China, but with commentary from management that suggested that sales in China were recovering strongly at the start of 2023. The less direct impact of Chinese optimism was felt on the local bourse via the share price rallies of diversified miners BHP Group and Anglo American (+15% and +10% MoM, respectively) that bounced alongside the price of iron ore (+5.5% MoM in US dollar terms).

The local currency weakened against the US dollar (-2.1% MoM), despite a generally soft month for the greenback against most currency pairs. The rand was one of three major currencies to weaken against the US dollar in January, and only the Argentine peso fared worse. Sentiment towards the rand was not helped by the impact that one of the most severe bouts of loadshedding is expected to have on the domestic economy. The prospect of bleak medium-term economic growth was also cited as a reason that the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) decided to hike rates by 0.25% in January rather than the 0.5% that some economists were forecasting (and that two of the five MPC members favoured). The less hawkish MPC stance was supported by evidence that SA core inflation had started heading back towards the MPC’s target level of 4.5% YoY, with the latest core inflation data (for December) coming in at 4.9% YoY, below expectations (5.1% YoY) and the 5% YoY level it had settled at for the previous two months.

South African 10-year government bond yields followed global bond yields lower in January, ending the month at 10.3% (0.5% lower MoM).

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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.