Source: Platinum Portfolios Quarterly Newsletter (Q1 2024)
The first quarter of 2024 presented a complex landscape for the South African equity market. While initial optimism for ag-gressive interest rate cuts fuelled some hope, the reality proved more measured.
Despite a slight decrease in fuel prices towards the end of 2023, inflation remained a concern. The South African Reserve Bank (SARB) opted to keep the key repo rate at 8.25%, unchanged throughout the quarter, maintaining the highest level since 2009. This decision, driven by the need to curb inflation, put a damper on investor expectations for a swift rate cut and dampened market sentiment.
The FTSE/JSE All Share Index declined by 2.25% in the first quarter, reflecting overall market weakness. This decline was pri-marily driven by a downturn in the commodity sector, likely due to global economic jitters. However, a bright spot emerged in the property sector. The SA Listed Property Index defied the trend, returning 3.47%. This resilience could be attributed to a search for yield in a high-interest-rate environment, with property offering a potential hedge against inflation.
Investor sentiment in South Africa was also influenced by global trends. Emerging markets faced headwinds, and the Rand weakened against the Dollar and the British Pound.
Despite the lacklustre performance in Q1, there are reasons for cautious optimism. South African stocks are currently trad-ing at attractive valuations compared to their global counterparts. This could position them for a potential re-rating if eco-nomic conditions improve.
The second half of 2024 could be a pivotal period. The trajectory of inflation, shifts in the SARB’s monetary policy and the results of local elections could significantly impact the market. Additionally, developments on the global stage, particularly regarding economic growth and potential interest rate changes in major economies, will also play a role in shaping inves-tor confidence.