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April 2022 – floods, blackouts and the weakening rand

Road sign flooding
| Market Forces

April was a tough month for economies and markets across the globe. The Ukraine-Russia conflict continues to put upward pressure on food and commodity prices. US and UK inflation now stand at 8.5% and 7% respectively. In addition, a severe lockdown in Shanghai due to renewed Covid-19 outbreaks has intensified existing supply chain disruption. Also, Indonesia, the biggest producer of palm oil, banned all exports of this widely used commodity to ensure food security inside their own borders. In the UK, some supermarkets responded by limiting purchases of cooking oils.

Locally, KZN experienced one of the worst floods in its history with nearly 500 people dead and thousands displaced. Other than the devastation on a human level, the port and major trade routes had to close down, and government declared a national state of disaster. Added to that, Eskom continued nationwide loadshedding with its negative impact on economic growth.

Rand and SA stock market weaken in April

After strong currency strength in March, the rand weakened 8.24% against the US dollar and 2.62% against the euro in April. The FTSE/JSE All Share Index (ALSI) ended down 3.66% for the month. Major international markets also ended in the red. The MSCI World index (developed market global equity) lost 0.75% in rand terms for the month. This is the fourth consecutive month of losses for South Africans investing globally. The local listed property index (SAPY) ended down 1.41%. SA bonds (ALBI) lost 1.67% during the month and cash (STeFI) returned 0.36%.

Over the past 12 months SA equity had the strongest performance

Over the past 12 months, all major market indices delivered good returns. The local stock market was the best performing main asset class at 13.17%, followed by SA property at 12.16%. The ALBI returned 8.43% for the year, and cash gave 4.01%. The rand weakened 9.02% against the US dollar but strengthened 4.46% against the euro. Looking towards international markets, the MSCI World Index gave South African investors 5.19% in rand terms over the past 12 months.

World stocks remain the outperformer over 5 years

Despite a difficult year so far, world stocks sustained their lead over the long term. Global stocks as measured by the MSCI World Index returned 13.98% p.a. on average over the five years to 30 April in rand terms. In comparison, the ALSI returned 9.78% per year. SA bonds gave 8.24% per year and cash 6.03%. Listed SA property (the SAPY) is underperforming other asset classes over the long term at -5.22% per year, on average.

Table 1: Total returns to 30 Apr 2022

Apr YTD 1 year 5 years
ALSI (equity) -3.66 0.04 13.17 9.78
SAPY (property) -1.41 -2.66 12.16 -5.22
ALBI (bonds) -1.67 0.15 8.43 8.24
STeFI (cash) 0.36 1.40 4.01 6.03
MSCI World -0.75 -13.82 5.19 13.98
$/ZAR 8.24 -0.90 9.02 3.46
Euro/ZAR 2.62 -8.07 -4.46 2.80

Source: Morningstar | Total returns annualised to 30 Apr 2022

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