September 2023 Update

Making The News

Following the most recent decisions of several major central banks (US, Switzerland, England and Japan), to pause interest rates on the back of falling inflation, many market commentators now believe that we are close to the top of the hiking cycle. The market’s focus has now shifted to how long rates will remain high before rate cuts ensue.

Although China continues to remain a detractor, emerging markets outperformed developed markets in September. The Indian Stock Market was the only major stock market to produce a positive return and was largely responsible for the emerging markets outperformance. Interestingly, China also detracted from DM returns following the announcement that they would ban the use of iPhones within government offices, resulting in a $200bn loss in Apple’s market value.

The local equity market fell for a second consecutive month (FTSE/JSE Capped SWIX Index -2.9% MoM), negating all the positive returns YTD (-0.2%). Besides local cash (+0.7% MoM) losses in September were felt across all asset classes, evidenced by the poor returns of SA bonds (-2.3% MoM) and SA property (-4.1% MoM).  Local bonds experienced a sell off as the market began to digest the “Table Mountain” scenario in which developed market interest rates – which had increased rapidly over the last 18 months – are now poised to enter an extended period of “plateauing” at a high level.

Although August saw headline inflation tick up to 4.8% YoY, inflation has been slowing down over the last months towards the SARB’s target of 3-6%. Even though the 2023 GDP target remains subdued (+0.6%), several positive developments are brightening the medium-term outlook: 1)  RSA and China have reached trade agreements amounting to R41 billion with the aim of boosting manufacturing exports to China and increasing foreign investment in RSA, 2) Market sentiment surrounding loadshedding has improved after Kusile Unit 3 came back online ahead of schedule, and details relating to progress in private  sector solar projects were released (2023 projects total an estimated 3684MW versus 54MW in 2020).