Market Overview – July 2024 - Namibia

In July, global financial markets experienced mixed central bank policies and divergent regional economic data. Major central banks, including the US Federal Reserve (Fed) and the South African Reserve Bank (SARB) as well as the Bank of Namibia, kept interest rates unchanged, reflecting a cautious but stable approach to monetary policy. In contrast, Japan's central bank unexpectedly increased its policy rate by 25 basis points, while China opted for a rate cut in response to weaker economic conditions.

In the US economy, indicators presented a mixed picture. CPI fell to 3% year-on-year, slightly below expectations, while core CPI printed at 3.3%. Despite stronger-than-expected GDP growth of 2.8% (annualised, q/q), the labour market showed signs of strain, with the unemployment rate rising to 4.1%. This data led to heightened speculation that the Fed would cut rates in September.

Global equity markets showed varied performance in July. The S&P 500 posted a modest gain of 1.2%, while the Nasdaq experienced a decline of -0.7%. Notably, small-cap stocks outperformed large caps. Global bond markets rallied as investors shifted capital into bonds, benefiting from expectations of future rate cuts.

Commodities faced significant headwinds with declines in Zinc (-9.8%), Aluminium (-9.4%), Lead (-6.3%), and Palladium and Copper (both -4.9%). Gold, however, gained 3.9% due to weaker economic data from China and rising geopolitical tensions in the Middle East.

In local markets, South African assets demonstrated robust performance in July, with SA markets outperforming their global peers (in US$).

The JSE All Share Index gained 3.9% (in rands). Resource stocks led with a 5.7% return, largely driven by strong performance in gold stocks. Financials also performed well, with a 5.4% increase. Industrials however, lagged with a 2% return. Notably, South African equities have continued to show resilience, supported by positive sentiment towards income-earning sectors.

SA bonds also saw favourable returns, with the All Bond Index rising 4.0%. The short-dated R186 bond yield decreased by 43 basis points, while the longer-dated R209 bond yield fell by 49 basis points. The yield curve flattened slightly to 2.67%, and the 10-year R2035 bond yield strengthened to 10.895%. Inflation-linked bonds posted a modest positive return of 1.7%.

The rand ended the month flat against the US dollar at just below R18.20/$ but weakened against the euro and pound sterling. SA CPI fell to 5.1% y/y in June, remaining within the SARB’s target range.

In local markets, the NSX Overall Index marked a modest 1.7% increase from June’s strong 6.9% gain, reflecting a more tempered market performance recently. Over the past year, the NSX Overall Index has delivered a robust 16% return.

In the bond market, the IJG All Bond Index climbed by 3.4% in July, following a 5.2% rise in June, and the IJG Money Market Index increased by 0.70%, slightly above June’s 0.68%.

On the economic front, Namibia’s growth moderated to 4.7% in Q1 2024, down from 5.3% in Q1 2023. This slowdown is largely attributed to weaker performance in mining and manufacturing, though the electricity and water sector showed strong growth. The tertiary sector, particularly wholesale and retail trade, continued to thrive.

Inflation trends indicate a softening, with annual inflation easing to 5% in the first quarter of 2024, down from 7.1% a year prior. May saw a slight increase to 4.9%, with forecasts suggesting a gradual decline to 4.5% by 2025.

These developments offer a nuanced view of the global and local markets and economy. As always, we remain committed to keeping you informed with the latest insights to help guide your investment decisions.

In conclusion, July was a period of mixed economic signals from major economies, and a positive yet volatile performance in local markets. As global uncertainties persist, maintaining a diversified investment approach while monitoring both local and global macro environment is key to managing investment strategies effectively.