Local Markets Review

The local market could not escape the weakness of world markets and followed them lower in August, as the All-Share index closed down by 5.1%. The only index eking out a positive month was property, up 0.8%, while the balance trended softer, financials by 2.0%, industrials by 5.1% and resources by 10.3%. Share performances to highlight are: Prosus, weaker by 7.3%, Naspers down by 8.5%, Richemont declined by 6.7%, while Anheuser Busch was up by 5.5% and British American Tobacco up by 4.9%.

On the economics front, July’s headline CPI slowed for the fourth consecutive month, having eased to 4.7% YoY, vs the June reading of 5.4%, with fuel prices continuing to decline (but watch this space). Core CPI, which excludes food and energy, printed at 4.7% YoY for July, a 10-month low, vs the previous reading of 5% YoY for June. It is important to note also, that one of the key upward drivers of inflation over the last few months, namely food and non-alcoholic beverages, has dropped to single digits, printing at 9.9% YoY for July vs the previous reading of 11% for June. Retail sales data for July, released
in August, fell again, declining by 0.9% YoY vs the revised 1.6% YoY drop in May. The year now reflects a decline in retail sales data every month. Expectation is that with the latest inflation figures, there could be another pause in the interest rate at the SARB Monetary Policy Committee September meeting.

However, if there are unfavourable risks to the Bank’s expectation of reaching the midpoint of the inflation target by the first quarter of 2025, we could see the bank respond with marginally higher interest rates. Currently, everything points to the SARB continuing with a tighter monetary policy for longer, with estimates of a first rate cut only in the second quarter of 2024.