Economic Report

These reports take a look at highlights in the local and global markets over the preceding month.

Economic Report: Review of April 2020

Markets staged a solid comeback in April, rebounding from the steep drawdowns of the previous month. The gradual easing of COVID-19 restrictions in many developed countries, preceded by aggressive stimulus measures from governments, helped propel the April rally. Global developed market equities were the main drivers of the rebound in local markets as the rand continued to weaken, albeit not as much as the blow-out seen in the previous month.

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Economic Report: Review of March 2020

The outbreak and spread of the coronavirus pandemic continued to take centre stage during March as the situation deteriorated with a growing number of confirmed cases and deaths. This was particularly pronounced in developed market economies (i.e. US and Europe).

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Economic Report: Review of February 2020

COVID-19 has taken centre stage in the political, economic, social and market landscape. Heightened anxiety over its impact on global growth and its possible catalytic effect to a global recession drove the risk-off sentiment seen in February. Investors are hunting for safe-haven assets amid uncertainty. COVID-19 has exerted a further strain on the economy, given the already-existing domestic fiscal woes. As a result, the rand experienced another sharp sell-off this month. Globally, the same COVID-19 sentiment reverberates as central banks engaged in emergency fiscal and monetary stimulus measures to curb the dire impact of the virus. This heightened uncertainty has dragged equity valuations to incredibly low levels as markets have officially entered bear territory.

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Economic Report: Review of January 2020

After a handsome rally in December 2019, local equities experienced “a fall from grace” as the sharp weakness of the rand was not enough to even lift the market into positive territory in January, except for a few rand-hedge market darlings such as Naspers and British American Tobacco. Domestic equities remain out of favour as local headwinds of policy uncertainty, slow pace of reforms and fiscal woes prevail. Investors are rather finding value in local bonds given the attractive levels of real yields. Globally, the outbreak of the coronavirus took centre stage, raising concerns over its impact on global growth. As a result, developed and emerging market equities recorded disappointing performances in base currency. However, the sharp depreciation of the rand bolstered global returns in rand terms.

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Economic Report: Review of December 2019

Domestic equities buoyantly staged a recovery in December as the resource sector lifted equity markets out of last month’s negative territory, characteristic of a “Santa Claus rally”. The SA economy recorded negative growth in the third quarter, reflective of the prevailing fiscal quagmire, exacerbated by the slow pace of reforms (particularly in state-owned institutions such as Eskom). The rand firmed up strongly over the month while inflation continues to taper down. Globally, positive sentiment continued to prevail as talks of the first phase of the deal between the US and China led to an agreement between the two powers. As a result, developed and emerging market equities recorded strong performance in their base currency. However, returns in rand terms were dampened due to the sharp firming of the rand.

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Economic Report: Review of November 2019

Domestic equities broke their two-month winning streak as industrial stocks came under pressure alongside a much stronger rand which did not bode well for large-cap stocks (most of which are rand-hedges). Low growth, elevated debt levels, a strained fiscus and the slow pace of policy reforms are key features of the economy which contributed to Moody’s changing South Africa’s credit outlook from stable to negative. Global equity markets advanced during the month of November, amidst optimism over the US-China trade negotiations and declining fears of a global recession. In addition, market pricing seems to be reflecting confidence that growth will reaccelerate. As a result, the MSCI World delivered 2.30% in dollar terms during the month.

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Economic Report: Review of October 2019

South African equity markets extend their gains in October, after a lacklustre (albeit positive) performance in the previous month. Resources were the key drivers alongside the upturn in mid-cap stocks while domestic bonds came under pressure following the dire situation painted by the Minister of Finance, Tito Mboweni, in his Medium-Term Budget Speech. Global equity markets ended the month of October in positive territory, buoyed by more dovish central banks globally and optimism over the US-China trade negotiations. In addition, market sentiment was further supported by several upbeat corporate earnings results, helping ease concerns over slowing global economic growth.

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Economic Report: Review of September 2019

The South African equity market rebounded from last month’s losses, delivering positive returns, albeit very muted. Small-cap and financial stocks were supportive as the rand firmed marginally. Despite the economic recovery seen in the second quarter, SA is still facing structural headwinds. Global equity markets advanced during the month of September, amidst optimism over the US-China trade negotiations and interest rate cuts by central banks. In addition, the US Federal Reserve’s latest rate cut was aimed at supporting the US economy, amid ‘uncertainties’ about future economic growth.

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Economic Report: Review of August 2019

The South African equity market extended losses in August. The choppy ride was driven by the endless trade war between the US and China, which dampened global growth and exerted downward pressure on emerging market equities.

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Economic Report: Rreview of July 2019

South African equity markets ended the month of July lower, erasing the gains of the previous month with global sentiment shifting from risk-on to risk-off as trade tensions between the US and China escalated to levels that sparked concerns over slowing global growth.

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Economic Report: Review of June 2019

South African equity markets ended the month of June higher, erasing losses of the previous month. The recovery was on the back of a shift in global sentiment from risk-off to risk-on as trade tensions between the US and China eased alongside global market expectations for the US Federal Reserve to cut rates

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Economic Report: Review of May 2019

South African equity markets ended the month of May lower, erasing all the gains of the previous month. It was a classic case of the investment adage “sell in May and go away” as equity markets offered no place for investors to hide.

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Economic Report: Review of April 2019

South African equity markets ended the month of April higher, the highest rally in 2019. Gains came on the back of stellar returns from Naspers, alongside a rally in retailers. The rand strengthened, leaving notable rand-hedge counters to end the month in negative territory.

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Economic Report: Review of March 2019

South African equity markets continued to rally in March, albeit at a slower rate than the previous month. The uptick came on the back of a weakening of the rand - that was supportive to rand-hedge counters - which drove returns of large-caps and thereby lifted the overall index despite the downturn in small-caps and mid-caps.

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Economic Report: Review of February 2019

South African equity markets continued to rally in February driven by a strong resource sector. The rand weakened by 6.34% for the month, while resource shares advanced 9.06%. The major contributors were large- and mid-cap stocks, while small caps and property stocks retreated from the previous month’s gains. Investors also digested the State of the Nation Address and the budget speech as Eskom took centre stage.

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Economic Report: Review of January 2019

The month of January fared well for South African investors as all asset classes delivered positive returns. Property led the gains after having a bumpy 2018 that saw the real estate sector plummeting more than 25%. Global equity markets ended the month in positive territory, boasting the best month in more than seven years. Equity market returns were mainly driven by strong corporate earnings releases and optimism over the US-China trade talks.

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Economic Report: Review of November 2018

Low returns from aggressive asset classes continue to characterise the South African market - with low growth, global volatility and the enormous selling of South African equities being key factors. Conservative asset classes delivered positive returns for the month, with bonds taking the crown as the best performing asset class.

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Economic Report: Review of October 2018

The month of October saw depressed market returns across the board as cash was the only asset class that delivered positive returns. Despite investment building-block initiatives being driven by the government to boost the economy and exit the technical recession, SA economic fundamentals remain challenged.

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Economic Report: Review of September 2018

The economic and market environment in South Africa remains in distress, owing to protracted volatility in emerging markets coupled with rising US yields and global trade uncertainties. September has been a month strongly characterised by negative to low return numbers as markets experienced broad headwinds that saw downturns in almost all asset classes, with the exception of sluggish positive returns from “safe haven” asset classes.

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Economic Report: Review of August 2018

The economic and market environment in South Africa remains challenged as investor anxiety prevails because of the volatility in emerging markets and the lack of clarity in the ruling party’s land reform program. In the month of August, local equities and property were lead performers, while the more conservative asset classes delivered poor performance.

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Economic Report: Review of July 2018

Headwinds are blowing against the South African economy as the turbulent economic and market environment continues to prevail. The domestic landscape has precipitated a risk-off environment wherein investors are tending to exhibit biasness towards safer and more conservative assets as these asset classes are delivering attractive returns relative to more aggressive asset classes. In the month of July, bonds and cash were the leading performers, while equity and property detracted.

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Economic Report: Review of June 2018

The contraction of the South African economy was by far the biggest highlight in the month of June, as domestic markets wrestled to stay afloat in the midst of global uncertainty. The end of the first semester of 2018 has seen property and mid cap stocks taking the largest knocks, while conservative asset classes such as bonds and cash have taken the lead. In terms of domestic sectors, resources was the only sector that posted gains year-to-date, while all other sectors detracted.

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Economic Report: Review of May 2018

The euphoria around the victory of newly elected President Ramaphosa has dissipated as the current political and economic environment is telling a different story. As a result, conservative asset classes rallied in the month of May, while risky assets detracted.

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Economic Report: Review of April 2018

The South African domestic outlook remains one that is still driven by what has been dubbed as the “Ramaphosa effect”, which is starting to give way to fundamentals as investors are beginning to look for concrete evidence of the ability of South Africa to deliver sustainable returns.

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Economic Report: Review of March 2018

The South African domestic outlook remains one that is still driven by what has been dubbed as the “Ramaphosa effect”, which is starting to give way to fundamentals as investors are beginning to look for concrete evidence of the ability of South Africa to deliver sustainable returns.

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Economic Report: Review of February 2018

Global equity markets ended the month of February suffering a sharp correction following the stellar performance in January. The sharp sell-off was mainly driven by an increase in government bond yields in major markets, especially in the US.

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Economic Report: Review of January 2018

Locally, the effects of the ANC December elective conference continued in January as market optimism grew stronger over not only the victory of Cyril Ramaphosa becoming President of the ANC, but also over the looming removal of President Jacob Zuma as President of the country, a transition which sparked a tailwind on the rand at the end of January 2018.

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Economic Report: Review of October 2017

Optimism gripped global equity markets in October driven higher by positive economic data and strong corporate earnings. Several major global indices hit new record highs, while volatility reached a historic low. Global bonds and equity were positive in ZAR terms as the rand weakened against the US dollar for the month of October.

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Economic Report: Review of September 2017

Global equity markets have moved beyond the geopolitical tensions between the US and North Korea to end the month in positive territory. Both global bonds and equity were positive in ZAR terms as the rand weakened against the US dollar for the month of September. Markets drew strength from the positive economic data indicating a healthy global economy and were dominated by the chance of major corporate tax cuts in the US.

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Economic Report: Review of August 2017

Global equity markets remained under pressure for much of August. Geopolitical tensions, the struggles of President Donald Trump’s administration, another terror attack in Europe and Hurricane Harvey dominated headlines, yet the MSCI World still managed to end in positive territory. In ZAR terms, both global bonds and global equities were lower, as the rand strengthened against most major peer currencies.

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Economic Report: Review of July 2017

Global equity markets reached an all-time high in July as appetite for risk remained relatively robust. Economic data largely supported the global growth story over the month, which has come to the fore since the beginning of this year. In ZAR terms, both global bonds and global equities were higher, boosted further by the rand weakening against most major currencies.

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Economic Report: Review of June 2017

The shift in tone from central banks drove global financial markets in the month of June. The Bank of Canada, the Bank of England and the European Central Bank (ECB) are now seen as likely candidates to follow the US Federal Reserve (Fed) in raising interest rates before the end of this year.

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Economic Report: Review of May 2017

Politics dominated the headlines in May, with elections in France, Iran and South Korea, as well as renewed political controversy in the United States and Brazil weighing on investor sentiment.

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Economic Report: Review of April 2017

Global equities advanced in US dollar terms in April with global bonds virtually matching their equity counterpart’s return. In ZAR, both global bonds and global equities were positive, but slightly weaker due to the rand strengthening against the US dollar (-0.38%).

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Economic Report: Review of March 2017

Global equities continued to enjoy one of the strongest starts to a year since 2012, despite a modest pullback in the equity markets in March. The US election, coupled with the hope for tax cuts, and increased infrastructure spending and regulatory reform, have undoubtedly played a pivotal role in the rally which took place in November.

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Economic Report: Review of February 2017

The month of February, albeit a few days shorter than other months, kicked off with three central bank meetings, continuing a slightly more hawkish tone with regards to monetary policy. Both offshore equities and bonds rose during February in USD, with equities continuing to benefit from an improving economic backdrop.

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Economic Report: Review of January 2017

The first month of 2017 can be characterised by political noise, with the inauguration of President Donald Trump and political headlines dominating the global arena. There have been a wide range of political flashpoints, from immigration to trade, however, the implications in the short term are still unknown.

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