May 30

Local markets review

Adrian Meager, Orion Investment Managers Managing Director and Chief Investment Officer explains.

The local market trended firmer, up by 2.1% for the month, led by resources, with the sector up by over 7% for the month. This was followed by financials, up by 0.5% for the month, industrials up by 1%, and the property sector down by 2.3%. Some of the top performing shares were Naspers and Prosus, up by 6.7% and 7.4% respectively, predominantly on the back of a strong Tencent performance, which was up by 14% for the month in a strong China market.

On the resources side, BHP group pulled lower by 3.4% for the month after its hostile bid for Anglo American was rebuffed, with the latter up 32.6% on the back of the offer. Capitec was also up 11% for the month.

March headline CPI printed softer at 5.3% YoY compared to the February print of 5.6% YoY, while core CPI, which excludes food and energy, dropped to 4.9% YoY from the previous reading of 5.0% YoY in February, thus bringing it closer to the SA Reserve Bank’s 4.5% midpoint of its 3-6% target band. Retail sales decreased 0.8% YoY in February, on the back of a revised 2.0% YoY contraction in January, continuing to highlight the depressed local consumer environment.

Meanwhile the SARB continues to view exchange rate risk as a key source of inflationary pressure through its impact on imported goods. Consensus opinion for April shows a more cautious view regarding the SARB’s inflation risk expectations, signalling a revised expectation of two interest rate cuts for the year from three it noted in March.