Markets In Focus: May market snapshot
Markets were volatile in May, and the rand reached record low levels. In SA, the main events were weak economic growth data, continued load shedding and reports that the country may have supplied weapons to Russia. In the US, a tentative deal was reached to lift the government’s debt ceiling.
Rising interest rates
The Bank of England (BoE) raised its key interest rate from 4.25% to 4.5%. This is the 12th consecutive increase in rates by the BoE since December 2021 in its attempts to control inflation. In the coming months, some economists are forecasting one or two more rate hikes.
The South African Reserve Bank (SARB)’s Monetary Policy Committee continued its aggressive tightening approach, raising the repo rate by 50 bps to 8.25%. The latest hike marked the 10th consecutive increase in interest rates, bringing total increases to 475 bps since policy tightening began in November 2021. SARB Governor Lesetja Kganyago cited the inflationary impacts of a weakening rand, ongoing load shedding and elevated global pricing levels as the primary drivers of the hike.
The consumer price index (CPI) rose by 0.4% between March and April. This is the lowest reading since May 2022, when the rate was 6.5%. Annual inflation for food and non-alcoholic beverages eased slightly to 13.9% in April from 14% in March. South African annual consumer price inflation was 6.8% in April 2023, down from 7.1% in March 2023.
Global stocks outperform over five years
Global stocks, as measured by the MSCI World Net Index, delivered the highest returns to South African investors in the five years to 31 May 2023, with an average annual return of 17.88% in rand terms. For comparison, the FTSE/JSE All Share Index (ALSI) returned 9.9% a year in the same period. South African Bonds delivered 6.16% a year and cash 5.8%. South African listed property, as measured by the FTSE/JSE SA Listed Property Index (SAPY), has underperformed other asset classes over the long term, contracting by an average of 5.4% a year.
Table 1: Total returns to 31 May 2023
| March | YTD | 1 year | 5 years | |
| ALSI (equity) | -3.926% | 4.45% | 8.54% | 9.9% |
| SAPY (property) | -5.33% | -5.29% | -2.27% | -5.4% |
| ALBI (bonds) | -4.79% | -2.65% | 0.32% | 6.19% |
| STeFI (cash) | 0.65% | 3.03% | 6.5% | 5.8% |
| MSCI World Net (ZAR) | 7.3% | 26.39% | 29.79% | 17.88% |
| USD/ZAR | 8.38% | 16.46% | 27.162% | 9.37% |
| Euro/ZAR | 4.66% | 16.34% | 26.55% | 7.04% |
Source: Morningstar | Total returns annualised to 31 May 2023
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