Source: Platinum Portfolios Quarterly Newsletter (Q4 2023)
The final quarter of 2023 was a period of mixed emotions for the South African stock market. While global head-winds and domestic uncertainties kept the waters turbulent, the JSE All Share Index managed to carve out a positive return of 6.92% for the quarter. This was led by Shoprite (+56%), Bidcorp (+41%) and Glencore (+36%).
The listed property index enjoyed a strong rebound, returning 12.5% for the quarter but still well off its pre-Covid highs. The Financial & Industrial sector performed well over the period, with Resources basically flat.
The attractive yields on the local bonds enticed global investors who were net purchasers over the months of October and November. This provided strong returns for the asset class, with the All-Bond index over 8% for the quarter. This is despite the Fiscal woes facing South Africa. A widening budget deficit and rising debt levels raised fears of credit downgrades and potential sovereign debt defaults.
The Rand also strengthened over the quarter against the Greenback by nearly 3%. This in congruent with risk appetite increasing mainly from the outlook of global inflation looking to stabilise and even decrease into 2024. The Federal Reserve held rates steady for the past four meetings in light of this, which has aided to market per-formance over the short term. Interest rates across the world, including South Africa, will look to start decreas-ing in 2024 which will provide tailwinds to equity markets and capital appreciation to bonds.
Looking forward for the year ahead, local markets should benefit from monetary policy easing as inflation re-turns to the target bands. Latest headline CPI surprised on the upside, cooling to 5.5% (its first contraction since July) vs 5.9% the previous month. However, the ongoing energy crisis, characterized by frequent power outag-es (loadshedding), continued to cripple economic activity and investor confidence. Furthermore, there is heightened political uncertainty from the upcoming national elections and investors will be waiting to see if a new government is voted in and the policy landscape for the next 5 years.