The Stock markets had a tough quarter in September, ending a volatile Q3. This was true across the globe, but bonds were especially hard hit in developed markets. The strong US dollar helped to cushion the blow for our investors.
South African inflation returned to the target range for the first time since April 2022. Loadshedding improved slightly but remained unacceptably high. Eskom remains in a mess, with debt levels rising and we would cau-tion that promises made by Eskom should be taken with a pinch of salt. We need a consistent improvement by Eskom before we could in anyway be optimistic about their delivery of power. The higher petrol prices and weak South African rand will continue to keep inflation higher for longer.
The South African stock market had a tough quarter, with the FTSE JSE Capped Swix Total Return Index declin-ing by 3.8%. South African bond yields were under pressure in August and September due to concerns about the country’s fiscal outlook. The ALBI returned -1.5% for Q3. The South African yield curve remains very steep. Another concern is that the bond market has remained weak. The reason is that foreigners have been leaving the market. The impact of rising yields is costing South Africans a fortune with high funding requirements. We doubt on its past track record that the government will be able to align itself with treasury to reign in spending and make difficult choices. In an up-and-coming election year, this is unlikely.
The South African economic backdrop remains extremely tough. We have been bearish on the South African economy for over five years now and there are no indicators to change our view. We could see some tailwinds over the next year due to changes to loadshedding – with solar installations coming online and technical fac-tors. Longer term we remain on the sidelines hoping that there will be a change in economic conditions that will make sense for Platinum Portfolios to increase our exposure to South African equities.
