Investment Report, November 2011
The local financial market continued to be dominated by international sentiment during the month, although general performance was better compared to other emerging markets. The FTSE/JSE All Share Index recovered from its mid-month decline to end the month 1.6% in the black and to take the year to date return to 5.1%. The resources sector was the best performing industry with a return of 1.9%, followed by financial and industrial shares with performances of 1.2% and 1.1% respectively. The equity market benefitted somewhat from a weaker rand as the rand depreciated by 2.1% against the dollar to close the month at R8.12 a dollar.
Moody’s, the global credit rating agency, put South Africa’s credit rating outlook on “negative” from “stable” as they cited slower economic growth and pressure on the ruling government to abandon their current prudent financial policies for their deteriorated outlook. Economic growth for the third quarter of this year increased from 1.3% in the previous quarter to 1.4%. The non-cyclical sectors of the economy held up well, but declines in the cyclical sectors, including mining, manufacturing, and agriculture provided headwinds to GDP growth. In the meantime, local business confidence continued to deteriorate alongside the leading economic indicator. The latest employment data indicated that unemployment improved from 25.7% to 25%.
Consumer price inflation accelerated to 6% on the back of broad based gains in most of the underlying price components, but more specifically, due to an upside surprise in food prices. The Reserve Bank kept monetary policy unchanged during the month, but its inflation and growth forecasts continued to deteriorate. Selling pressure from foreign investors resulted in the All Bond Index ending the month flat. Listed property, however, declined by 0.9%.