November 2021 market review

South Africa received a fair amount of international attention in the month of November – some of it more welcome than other. Developed world countries like the US, UK, France and Germany committed to helping the country shift to a low carbon economy. These countries, as well as the EU, committed $8.5 billion over the next five years through a range of financial instruments that typically come with more benevolent terms than normal market-related loans. But when South African scientists identified and disclosed a new Covid variant later in the month, many of these countries were quick to close their borders to SA and the rest of southern Africa. Global stock markets also suffered a knee-jerk correction in response to the uncertainty around the new variant, later named ‘Omicron’.

Other news during the month was Heineken’s offer to buy South African wine and spirits maker Distell Group for 2.2 billion euros. This follows years of speculation that Distell is up for sale next after the AB InBev-SAB Miller deal of 2016.

SA stocks hit record high

Mid-month the JSE broke through the 71 000 level for the first time. To get ahead of what could be an inflationary cycle, following the November MPC meeting the Reserve Bank raised the repo rate by 25 basis points to 3.75%. This means the prime lending rate of commercial banks now stands at 7.25%. The Reserve Bank governor stated increasing concerns around higher inflation.

Inflation remains one of the biggest risks to asset prices

US consumer prices soared 6.2% from a year ago — the biggest 12-month jump since 1990! And UK inflation is at a 10-year high. The UK’s lifting of a regulatory cap on utility bills last month played a role, with gas prices paid by consumers up 28.1% in the year to October.

SA consumer prices rose by 4.2% in annual terms in October, leaping from a 3.1% increase in September. Unemployment in SA continued accelerating in the third quarter, reaching 34.9%, up from 34.4% in the previous quarter.

A strong month for SA equity

During November the FTSE/JSE All Share Index (ALSI) gained 4.47% in total returns for the month. The local listed property index (SAPY) gave a return of 2.16%. SA bonds (ALBI) gained 0.66% during the month and cash (STeFI) returned 0.32%. The MSCI World index (developed market global equity) returned 3.11% in rand terms for the month of November. The rand weakened a significant 5.42% against the US dollar and 2.54% against the euro.

Property poised to be the top SA asset class for 2021

Most indices showed strong returns over the past one-year period.  The ALSI returned 28.53% for the year to end November. Listed property recovered by 44.31% from last year. The ALBI returned 8.14% for the year, and cash gave 3.79%. The rand weakened 3.54% against the US dollar and strengthened 2.57% against the euro over the 12 months to end November. Looking towards international markets, the MSCI World Index gave South African investors 26.09% in rand terms.

Developed markets show stellar 5-year returns

Over the past five years to November 2021, the ALSI returned 10.55% per year and SA bonds 8.81% per year. With a return of -5.0% annualised, listed SA property (the SAPY) was the worst performer. Cash gave 6.31% p.a. on average over the past five years. The world stock market – specifically developed markets – took the lead over the past five years with the MSCI World Index returning 17.69% annualised in rand terms over the five years to 30 November 2021.

Table 1: Total returns to 30 November 2021

Source: Morningstar | Total returns annualised to 30 November 2021