From a global perspective, the South African All Share Index outperformed most of the major equity indices (S&P 500, FTSE 100, Nikkei 225, Hang Seng, FSE DAX) in local currency. The rand’s appreciation that occurred during the quarter would have enhanced the outperformance of the local market by diminishing the returns for local investors’ offshore allocations. On the bond side, the longer end of the curve (higher duration) investments sold off more, while the short-term fixed-income instruments were close to flat for the quarter.
In terms of economic data, the following were a few key releases during March:
- Inflation is slightly down to 2.9% year-on-year for February (it was 3.2% in the previous month).
- The repo rate remained unchanged at 3.5%.
- The manufacturing PMI rose to 57.4, from 53 in the previous month, indicating the third consecutive month of expansion in manufacturing.
- Retail sales fell 3.5% year-on-year in January (-1.2% in the previous month), underperforming market expectations of -2.7%.
- Private sector credit growth slowed further in February, down to 2.62% year-on-year (it was 3.26% in the previous month).
The gross domestic product (GDP) data for the fourth quarter of 2020 was also released early March, pointing to quarter-on-quarter growth of 1.5% (6.3% annualised) vs. the 13.7% quarter-on-quarter growth of the previous (third) quarter. These two quarters of growth were, however, not enough to offset the economic shutdowns and loss of activity in the first two quarters, resulting in a 7% slump in GDP for 2020. While early indicators are pointing to slower growth momentum in the first quarter of 2021, the stronger commodity cycle and stronger than expected global economic recovery could provide support. A successful vaccination roll-out programme will also provide much needed confidence. The South African Reserve Bank has cautiously increased its growth outlook to 3.8% (from 3.6%) for 2021.
