Jun 29

Orion Investment Managers View on the South African Financial Markets

Orion Investment Managers Managing Director and Chief Investment Officer, Adrian Meager, provides an overview of the latest South African financial market developments.

The local market mirrored most of the international markets by trending weaker as the continued sell-off in local shares, exacerbated by the increasing financial cost of higher levels of rolling blackouts, together with the continued uncertainty around the government’s avowed ‘neutral’ stance on Russia, weighed heavily on sentiment.

The Financial Sector was hardest hit, ending the month down by 8.2%, followed by the Property Sector, down 6.2%, Industrials down by 3.1%, and Resources down by 2.2%. Share performance was also a mixed bag as BHP rose by 1.1%, Prosus was down by 5.4%, and Naspers declined by 8.7%, and Anheuser Busch weaker by 11.8%. Transaction Capital tanked during the month, initially down 43% on the back of looking for new funding as the taxi business came under pressure, with the counter losing a further 35% after reporting a loss of R1.86bn, vs the profit if R618m ln the previous year, resulting in a total share price loss of around 79% for the year to date.

On the economic front, April Headline inflation (CPI) slowed to 6.8% YoY, from 7.1% in March, with MoM CPI advancing by 0.4% in April vs the March print of 1.0%, mainly due to a decline in fuel inflation (5.0% in April from 8.1% in March) and a softening in food and non-alcoholic beverages (13.9% vs 14.0% YoY). Retails sales pulled back for the fourth month in a row, with the March reading of -1.6% YoY vs the February’s upward revised drop of 0.7%

As expected, the South African Reserve Bank (SARB) Monetary Policy Committee hiked the repo rate for the tenth time in 18 months by 50 basis points (0.50%), lifting the repo rate to 8.25% (the highest in 14 years and the prime rate rising to 11.25%).