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Markets In Focus: April market snapshot

April was a volatile month for markets, with most major stock indices struggling for direction before ending the month in the green. Markets were up with recent data highlighting a clear slowdown in US inflationary pressures, which has eased investors’ minds that the Federal Reserve will finally put an end to its aggressive hiking cycle. Nevertheless, concerns persist due to uncertainties surrounding global economies, escalating geopolitical tensions, and renewed fears related to the US banking sector. Concerns about the state of the US banking industry has been in the spotlight, following the announcement of US-based First Republic Bank’s quarterly results, which revealed that it lost over $100 billion in deposits in the first quarter.

The services PMI in China increased to 57.8 in March, the largest increase since November 2020, according to data that showed the country’s service industry is still growing. The sector is benefiting from the reopening as seen by the new orders and jobs increase. Given that China’s manufacturing sector continues to underperform and that the manufacturing PMI has dropped to 50, it is still too early to declare a full-fledged economic recovery. The slowdown in factory activity underlines the persistent negative effects of the real estate crisis and generalised financial instability on growth.

Closer to home, the local economic environment continues to worsen with the return to Stage 6 power cuts and ongoing rail and port constraints. The South African Reserve Bank’s (SARB) latest policy review estimates that loadshedding will reduce GDP growth by 2% in 2023 and add 1% to CPI.  Persistent load-shedding with likely increases into winter poses further challenges for many businesses and consumers. Fears of CPI remaining elevated increase the likelihood that the SARB will raise interest rates again in May.

Global stocks remain outperformer over five years

Global stocks, as measured by the MSCI Net World Index, delivered the highest returns to SA investors over the five years to 30 April 2023 with a return of 16.71% per annum, on average, in rand terms. In comparison, the FTSE/JSE All Share Index (ALSI) returned 10.00% per annum over the same period. SA Bonds delivered 6.81% per year and Cash 5.79%. SA listed property, as measured by the FTSE/JSE SA Listed Property Index (SAPY), is underperforming other asset classes over the long-term, contracting 4.52% per annum, on average.

Table 1: Total returns to 30 April 2023

April YTD 1 year 5 years
ALSI (equity) 3.38% 8.72% 12.56% 10.00%
SAPY (property) 5.36% 0.04% 3.28% -4.52%
ALBI (bonds) -1.11% 2.24% 6.44% 6.81%
STeFI (cash) 0.61% 2.37% 6.22% 5.79%
MSCI Net World (ZAR) 4.86% 17.79% 19.28% 16.71%
USD/ZAR 3.05% 7.46% 15.60% 7.93%
Euro/ZAR 4.72% 11.16% 20.98% 6.00%

Source: Morningstar | Total returns annualised to 30 April 2023

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