Anglo bid helps SA stocks outperform in April, but a wild ride for Mag7

In the monthly update of investment markets, Corion’s David Bacher takes us through the highlights for April where South African equities outperformed – and quarterly results lent fresh volatility to Wall Street’s Magnificent Seven. Bacher explains the reasons for the past month’s performance of various investment markets – and looks ahead to what we can expect in May. He spoke to BizNews editor Alec Hogg.

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Summary of the interview

In April, South Africa saw significant economic shifts. A highlight was BHP’s interest in acquiring Anglo American, marking a notable power shift. Globally, economic updates showed a slowdown in US GDP growth and concerning inflation data, leading to market retreats. Despite this, gold surged, and Chinese equities rebounded, signaling potential opportunities. South Africa’s market, buoyed by resource sector gains, outperformed developed markets, but property struggled due to interest rate sensitivity. Capitec Bank impressed with substantial client growth, while Mondi faced challenges due to a failed merger. The performance of individual sectors underscored the importance of sector calls in South Africa’s market dynamics. Looking ahead, attention turned to South Africa’s elections, hoping for a smooth, fair process amidst ongoing challenges like load shedding. As investors navigate these complexities, active management and strategic sector allocation remain crucial for success.

Edited transcript of the interview

Alec Hogg [00:00:08] April has been quite a month here in South Africa. David Barker from Corion is here with us just after month-end to go through the vital stats for investors. Well, a major highlight was the potential purchase of Anglo American by Australian giant BHP. David, quite a shift, isn’t it?

David Barker [00:01:24] Definitely. April was challenging for international markets due to sluggish US GDP growth of 1.6% and concerning inflation data, leading to a 3.3% global equities dip. The Nasdaq even saw its first drop since last October.

Alec Hogg [00:02:59] True, just a few months back, rate cuts were expected, but now there’s talk of potential hikes. Market sentiments change fast.

David Barker [00:03:35] Absolutely. Gold soared around 14% this year, outpacing equities. However, the property sector struggled due to prolonged high interest rates.

Alec Hogg [00:04:53] Despite challenges, Chinese equities rebounded notably, possibly signaling a turnaround.

David Barker [00:05:45] Indeed, China’s low valuations attracted attention. South Africa’s market, largely buoyed by resources, outperformed international markets but remains undervalued.

Alec Hogg [00:07:38] The magnitude of market movements, like Alphabet’s $200 billion spike, is unprecedented and highlights the sheer scale of these corporations.

David Barker [00:09:25] Indeed, the Magnificent Seven tech firms saw dramatic swings, emphasizing the concentration risk in the market.

Alec Hogg [00:10:44] The rand’s decline mirrors global trends, driven partly by the dollar’s strength and challenges in other economies like Japan.

David Barker [00:11:52] South African equities had a mixed month. While resources surged, property struggled amid interest rate concerns.

Alec Hogg [00:13:06] The BHP-Anglo deal could spark further industry activity, with Glencore reportedly eyeing a bid too.

David Barker [00:14:07] Capitec’s growth was impressive, while Mondi faced setbacks due to a failed merger attempt.

Alec Hogg [00:16:38] Management issues can impact share performance, but South Africa’s challenging operating environment also plays a role.

David Barker [00:17:33] Despite recent struggles, South African equities still offer real returns, unlike some global markets.

Alec Hogg [00:18:58] Sector calls are crucial in the South African market, with resources dominating performance over the years.

David Barker [00:20:18] On a lighter note, the timing of electricity stability around the elections is a bit coincidental, don’t you think?

Alec Hogg [00:21:12] Indeed. Let’s hope for a safe, fair election and a brighter future ahead. David Barker is with Corion Capital. I’m Alec Hogg with News.com.