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August 2023 Update

Making The News

Slowing economic growth in developed markets as well as weak data coming out of China weighted on risk assets during the month. Against this backdrop the MSCI All Country World Index returned -2.5% in USD, the S&P 500 shed -1.4% and the MSCI Emerging Market Index shed -6.2%.

US bond yields rose to a high of 4,36% due to 3 broad factors. Firstly, a loosening in yield curve control in Japan saw one of the remaining anchors in developed market sovereign bond market shift higher. Secondly, the unexpected downgrade of the US sovereign rating by Fitch to AA+ from AAA. And finally, the uncertainty surrounding the path of interest rates caused negative sentiment.

Confusing messaging from central bank policymakers did little to improve investors’ risk appetite. Jerome Powell’s speech was relatively neutral, stating the Fed is “prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective”.

Domestically, SA CPI data released during the month surprised positively – both headline and core inflation printed lower than consensus expectations with both at 4.7% y/y vs 4.9% expected. CPI is now comfortably back within the SARB’s target range, and the important food component eased further to 10% y/y from 11.1% in June and a recent peak of 14.4% in March.

The ALBI returned -0.23% for August. Shorter dated bond yields rallied (supported by better inflation data) whilst longer dated yields moved higher as markets await a fiscal update in the MTBPS in late October. The Rand weakened substantially over the month by -6.5% versus the USD. The FTSE JSE All Share Index returned -4.8% in the month. Within SA, resource shares felt most of the intense pressure, reflecting weak sentiment, but also poor recent operational performance. The FSE/JSE Resources Index lost -9.6% for the month, whilst industrials also fell sharply by -5.1%.

July 2023 Update
September 2023 Update