Markets in Focus: February Market Snapshot

Equity investors in most developed and emerging markets enjoyed favourable returns in February. South Africa was, however, the exception. Domestically, the National Budget received a lukewarm response, and uncertainty ahead of national elections in May created little incentive for investment.

Expectations for early US interest rate cuts were again pushed out after the latest data on the world’s biggest economy reflected sturdy labour markets and sticky inflation. This buoyed the dollar but was negative for bonds. US equities gained on the back of better-than-expected Q4 2023 earnings reports from several companies, coupled with stand-out performances from a few tech stocks. NVIDIA, the AI chip maker, has appreciated by 240% year-on-year and its market capitalisation, at $2 trillion, exceeds that of Amazon and Alphabet.

In the Eurozone, markets welcomed data showing stronger manufacturing activity and slowing inflation. Germany’s inflation rate for January reached its lowest level since June 2021. UK stocks lagged as data showed the economy moved into a technical recession in Q4 2023 and company earnings reports disappointed.

Emerging markets, in general, reversed their January losses, propelled by interest in tech stocks (e.g. Taiwan Semiconductor Manufacturing) and renewed optimism surrounding India and China’s growth prospects. Although China’s property sector is still mired in debt, and economic growth has slowed, investors are pinning their hopes on more decisive government stimulus measures. The Shanghai Composite Index added about 8% in the month.

In South Africa, the JSE All-Share Index shed another 2.44% in February, bringing its year-to-date loss to 5.31%. Property stocks edged up, with a 0.82% gain, but this could not offset losses in the resources sector, as platinum, palladium and iron ore prices weakened.

The rand depreciated by 3.15% against the dollar and by 2.76% against the euro in February. In the past year, the rand has fallen by 6.41% against the dollar. Rand depreciation, combined with the strength of the US’s biggest stocks, which dominate global equity indices, resulted in South African rand investors with diversified offshore holdings earning a 7.5% return for the month, based on the MSCI World Net Index (ZAR).

Table 1: Total returns to 29 February 2024