Markets In Focus: April market snapshot

A surge in the gold price to an all-time high of R2 432/oz on 19 April 2024 injected some fresh impetus into South Africa’s sluggish All-Share Index (ALSI), which gained a total of 2.95% at the end of the month, despite subsequent declines in gold prices.

South African equities and the rand also benefited from improved sentiment towards emerging markets. Results from local polls suggest a relatively market-neutral outcome to the National Election on 29 May 2024. Significant in April 2024 was BHP’s offer for Anglo American, resulting in a 32.6% increase in Anglo shares. Positive highlights include firmer iron ore prices, an absence of load shedding for over 30 days, and reports of progress in logistics planning by new management at Transnet.

Following robust gains in the first quarter, the US S&P 500 Index was 4.2% lower at the end of April, dragging down the MSCI World Net Index by the same percentage. Recent earnings reports from US companies mostly surpassed forecasts but markets focused instead on the likelihood of deferred interest rate cuts. The US labour market remains very strong and the country’s consumer price index for March 2024 was 3.5% higher year-on-year, which is above the US Federal Reserve’s 2% target. From four US interest rate cuts in 2024 that were anticipated in December 2023, the market now expects only one.

However, the European Central Bank appeared to be moving towards a mid-year interest rate cut as euro area inflation in March slowed to 2.4% year-on-year from 2.6% in February 2024. In the UK, March inflation was down to 3.2% year-on-year, its slowest pace since September 2021, from 3.4% in February 2024. Recent comments by the heads of the central banks in both areas have been dovish.

Emerging markets were more positive, stimulated by potential signs of a strengthening Chinese economy and regulatory changes. Hong Kong was the best-performing major stock exchange in April, rising by 7.4% month-on-month. Shares in Tencent, the Chinese integrated internet solutions provider, reflected the gains, as did its JSE-listed investors, Prosus (up 6.7% month-on-month) and Naspers (up 7.4% month-on-month), both of which are heavily weighted in the ALSI.

The rand strengthened by 0.53% against the dollar in April 2024, but it is still 3% weaker on a one-year basis. Over one and three years, a rand investment in the MSCI World Net Index would have returned 21.96% and 16.65% respectively, against the ALSI’s one- and five-year returns of 1.14% and 9.41%. Over one year, the ALSI also underperformed domestic cash, bonds and listed property.

Table 1: Total returns to 30 April 2024