By Peter Little
SOUTH African equities experienced a third consecutive positive month in May with the FTSE/JSE Capped SWIX Index up 0.9% month on month (m/m) despite a post-election wobble that shaved 2.4% off the index’s monthly performance in the last few days of May.
South Africa’s national and provincial elections saw the ruling ANC comfortably lose its majority, achieving 40% of the national vote, ushering in the necessity of a coalition government.
Newcomer MKP garnered 15% of the national vote and the numerous potential coalition permutations introduced a reasonable degree of uncertainty about the shape of South Africa’s future government, driving domestic asset values slightly lower into month end.
Outside the wobble in local equities into month end, the rand fell 3% against the US dollar post-elections, leaving the local unit 0.1% m/m weaker against the greenback in a month where the US currency was softer against most other major global currencies.
South African government bonds were also on track for a decent month, tracking global bonds higher before a post-election pullback saw the government’s 10-year borrowing rate edge higher, leaving it unchanged at 12.2% per annum at month end.
Local companies with earnings geared towards the domestic economy were generally slightly weaker in May, though, as always, there were positive and negative outliers in that cohort.
Discovery fell 7% m/m on the back on the announcement that President Cyril Ramaphosa had signed the National Health Insurance (NHI) Bill into law, while Woolworths saw its share price suffer a 9.5% fall m/m after warning that its next results announcement would see earnings decline by more than 20% year on year.
Pick n Pay was a positive outlier as investors looked through a disappointing earnings update, and the share price bounced up 23% m/m as investors responded positively to the company’s turnaround plan and news that its controlling shareholder, the Ackerman family, would relinquish control.
Among the miners, platinum miners rose 6.2% m/m and were the biggest mover, helped by an 11% m/m increase in the platinum price.
Shares with predominantly non-SA earnings generally delivered a positive contribution, including a 4% m/m rally in the value of investment conglomerates Naspers and Prosus.
Luxury goods company Richemont rose13% m/m and was also a significant positive contributor in May as it released financial year 2024 results, which showed a continued strong performance from its key jewellery division, while the specialist watchmakers division saw margins hold up well despite concern about the potential for weakness in consumer spending from a high Covid-19 base.
The SA Reserve Bank kept the country’s interest rate flat at its late May meeting as expected even as South Africa’s latest inflation data came in slightly below expectations with core inflation up 4.6% year on year.
Peter Little is a fund manager at Anchor Capital.
BUSINESS REPORT