March 2018 market overview

March was a month filled with good news gifts for South Africans, even though the stock market took a few hard knocks. Last year’s economic growth data was released – 1.3% for the 2017 calendar year, a higher percentage than forecast. Later in the month Standard & Poor’s also raised their SA growth forecast for 2018 from 1% to 2%. Although this is a move in the right direction this level of growth is still too low to solve SA’s high unemployment rate. Saying that, from September to December last year SA managed to add 81 000 non-agricultural jobs to the economy, and average monthly earnings are now R20 004.

The integrity of SARS is pivotal in strengthening the fiscus of South Africa. President Ramaphosa has therefore taken steps to suspend Tom Moyane, head of SARS, with immediate effect. As a result of various positive political changes of the past two months, the RMB/BER business confidence index has climbed to its highest level since the start of 2015. Moody’s announced that it’s keeping South Africa’s credit rating at Baa3, one notch above junk status and upgraded the outlook of the economy to stable. More good news is that year-on-year headline consumer inflation is down to 4.0% from 4.4% the previous month. With inflation under control, the Monetary Policy Committee of the SA Reserve Bank cut interest rates by 0.25%, bringing the repo rate to 6.5% and the prime lending rate to 10%.

Internationally, China has cut its budget deficit target for the first time since 2012 and sets a growth goal of around 6.5% – consistent with the promise to create a ‘moderately prosperous’ society by 2020.

As mentioned, several large stocks experienced a difficult March. Naspers had its fourth consecutive negative month, impacted by the global tech rout, and several listed property stocks were hit hard. During March 2018 the FTSE/JSE All Share Index (ALSI) lost 4.2% on a total return basis, while bonds gained 2.1%. The SA Listed Property Index (SAPY) fell by another 1% in March, following large losses in January and February. Cash returned 0.60%. Internationally, the MSCI World Index contracted 4.1% in dollar terms and the MSCI Emerging Markets Index ($) lost 4.6%. For South African investors who measure their returns in rand, the weakening of the rand offset some of their losses on offshore assets in rand terms. During March the rand weakened 0.4% against the greenback and 1.2% against the euro.

For the 12 months to the end of March 2018, the ALSI and listed property returned 9.6% and -7.1% respectively. The ALBI returned 16.2% and cash 7.5%. Internationally, the MSCI World Index and the MSCI Emerging Markets Index ($) rewarded offshore investors with dollar returns of 11.3% and 21.45% respectively. The rand appreciated by 13.3% against the US dollar but weakened by 1.6% against the euro over the past year.