Local economic data is suggesting an economic recovery is underway, with increased exports and global trading activity providing further support.
The local pandemic efforts continue to make headway, though at a slow pace. South Africa has now reportedly procured enough vaccinations to reach the targeted numbers, while registrations for the broader population have formally opened. In line with US regulators, the South African Health Products Regulatory Authority temporarily halted the J&J Sisonke-implemented study to allow investigations into side effects from the Johnson & Johnson vaccine. By month-end, however, the suspension was lifted, but with additional conditions attached to its use.
South Africa continues to benefit from the tailwinds of a global economic recovery in more ways than one. While improved activity from major trading partners supports industry and local growth, increased exports and export prices, most notably for the commodities mined locally, against weak import demand has also provided a constructive backdrop for the rand, which has held its own relative to other emerging-market currencies. Incoming domestic data also suggests a broader economic recovery is underway, with improved activity across various sectors and services as restrictions eased. Retail sales, mining data and vehicle sales all showed improvement, with vehicle sales returning to pre-Covid levels. These trends bode well for tax revenues, providing some balance to public sector wage negotiations, which are off to a predictably rocky start. With the global trends providing the sun, one hopes that reforms underway will provide the hay when it matters.
Local bonds also benefitted from the decline in global bond yields, with added support from constructive local data. March inflation was recorded at 3,2%, bringing it back into the South African Reserve Bank’s range of 3% to 6%. The increases were well anticipated as base effects, higher fuel prices and yearly tax increases added upside pressure. Core inflation came in at 2,5%, with both prints below market expectations as lower housing costs surprised to the downside. The All Bond Index gained 1,9% in April, bringing the year-to-date returns into positive territory (0,1%) while the Inflation-linked Bonds Index returned 1,1%.
The FTSE/JSE All Share Index gained 1,0%, bringing the 12-month returns to a pleasing 36,4%. Small-cap stocks once again delivered credible results, with the Small Cap Index up 5,6% relative to headline numbers from the Mid Cap Index (2,4%) and the Top 40 (0,6%). Bellwethers Naspers (-6,3%) and Prosus (-3,7%) both lost ground, while noteworthy returns came from chemicals (13,6%), largely driven by Sasol (15,3%). The best-performing asset class, however, was the interest-rate-sensitive property sector, rebounding 11,7% in April.
Please take a moment to give us your suggestions