South African markets started the week in divergence as the rand remained subdued with stocks were in the green, but investors were unmoved by the prospect that the appointment of an electricity minister would resolve the protracted energy crisis.
President Cyril Ramaphosa last night named a new deputy president after the Presidency announced David Mabuza’s resignation, and also announced the new position of electricity minister.
The rand fell 0.6% to R18.23 against the dollar yesterday, after stabilising over the past week when it was supported by a resurgence in global risk appetites.
The rand has been struggling to gain momentum, falling 5.2% month on month in February against the dollar, bringing its year-to-date decline to 7.2% against the greenback.
The domestic currency has also been plagued by hawkish monetary policy in the US as the Federal Reserve hiked its policy rate range by 25 basis points from 4.5% to 4.75% at its February meeting, with another 75 basis points to go in this cycle.
Investors have been assessing the outlook for interest rates, while also digesting China’s weaker-than-expected 2023 growth target.
Investec chief economist Annabel Bishop yesterday said the negative investor sentiment weighed on South Africa’s markets in the absence of a resolution to the fundamental problems South Africa’s economy faces.
Bishop said the rand continued to be underpinned by weakness, and unable to gain materially back to R17 to the dollar without a substantial shift in global risk sentiment towards marked risk-taking.
“The rand weakened somewhat over today on the expected reshuffle of the Cabinet, as markets remain negative on SA’s high political risk, especially with the reported cover-up of extreme corruption and malfeasance at Eskom,” Bishop said.
“Markets do not anticipate that the new Cabinet will bring any end to SA’s problems of declining productive capacity, and hobbling levels of corruption reported at the key electricity utility, which is crippling SA’s economic growth potential.
“The reported ongoing damage to Eskom’s production of electricity to SA, as well as extreme theft of its funds and damage to infrastructure negatively affect internal and external investor confidence, and thus the rand.”
Meanwhile, the JSE All Share index gained slightly for a second straight session, trading around the 78 600 point-level mainly boosted by industrials.
Bidvest led the pack with a 14.6% increase to R268 per share after it delivered an impressive first-half result, with trading profit growing by 14.5% to R5.8 billion.
The JSE benchmark index eased after reaching an all-time high in January passing through 80 000 points, despite the current uncertainties in the market.
Morningstar Investment Management portfolio specialist director Debra Slabber said this was a reminder that the stock market and the economy were different.
However, Slabber said the local equity index was a market cap-weighted index, meaning larger companies have a more significant impact on performance, skewing the picture somewhat.
“Whether it’s government policy, investor behaviour or the way we measure the stock market, several factors can cause a disparity between the stock market and the state of the economy at any given moment,” she said.
“The key point to remember is that the stock market is not the economy, but instead a leading indicator of where investors think the economy will go.
“What is clear is that South African equity is currently priced at levels last seen in the Great Financial Crisis in 2008, and after the Covid crash in 2020,” Slabber said.
BUSINESS REPORT