South African Market Update The Governor of the South African Reserve Bank, Lesetja Kganyago, announced a reduction in the repo rate of 100 basis points from 5.25% to 4.25% (its lowest level since 1973) during April in response to the Covid-19 pandemic, which will provide additional relief to SA consumers and businesses after a similar move in March. President Cyril Ramaphosa announced a R500 billion economic support package in Phase 2 of government’s response to the Covid-19 pandemic. One of the most notable announcements was a R200 billion loan scheme to assist small and medium size businesses in paying out salaries and other expenses. Following the downgrade by Moody’s of South Africa’s sovereign credit rating to sub investment grade in March, both S&P and Fitch both downgraded their credit ratings for SA further into sub investment grade territory during April. Headline inflation remains well contained, with the year-on-year figure to the end of March 2020 slowing to 4.1%. The largest contribution to the lower inflation figure came from the petrol price decrease in March, which contributed more than 50% of the decrease from the headline inflation figure reported at the end of February. See below for a summary of the key market movements for the month of April:
• The JSE All Share Index (+14.0%) moved significantly higher during April, largely driven by strong performance from Sasol and gold and platinum counters. • All local equity sectors finished the month higher, with Resources (+23.0%), Financials (+11.9%) and Industrials (+9.6%) all ending the month with strong returns. • Listed property (+7.0%) also ended the month higher, however, the asset class remains the worst performing local asset class year-to-date. • Local bonds (+3.9%) finished the month higher, as lower interest rates and well contained inflation led to investors taking advantage of the attractive real yields on offer. • Cash delivered a stable return of +0.5% for the month. • All major developed equity markets ended the month higher, with the largest contribution to the strong returns coming from US equities. The MSCI World Index delivered a return of +11.0% for the month. • Emerging market equities also delivered strong returns for the month. The MSCI Emerging Markets Index delivered a return of +9.2% for the month. • All major equity markets ended the month in the black, with Germany’s FSE DAX (+9.1%), Japan’s Nikkei 225 (+7.8%), the UK’s FTSE 100 (+5.7%) and China’s Shanghai SE Composite (+4.6%) all delivering strong performance. • US equities ending the month significantly higher, with both the NASDAQ 100 (+15.2%) and the S&P 500 (+12.8%) rebounding strongly during the month. • In terms of commodities, all major commodities ended the month higher. Oil (+11.1%) recovered some of its significant lost ground since the start of the year, while Gold (+5.8%) and Platinum (+5.5%) also ended the month higher. • The rand was weaker against most major developed market currencies for the month. The rand depreciated against the pound sterling (-4.4%), the US dollar (-2.8%) and the euro (-2.6%) during the month. *All data is sourced from Morningstar Direct as at 30/04/2020. The performance of South African asset classes is quoted in rands and the performance of global asset classes is quoted in US dollars.
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