Monthly Market Commentary – February 2021

Monthly Market Commentary – February 2021

South African Property had a spectacular month returning 8.6% followed by SA equity which posted a very respectable return of 5.3%. The JSE was primarily driven by sharp gains in resource counters, these were supported by impressive financial results and the tailwinds of global commodity prices. The rand was essentially flat over the month, ending at R15.07/$. Although this hides a significant strengthening (and subsequent weakening) to R14.44/$ in the middle of the month. The SA 10-year bond yield increased from around 8.75% to 9.10%. Domestic bonds continue to provide attractive real yields, which are particularly appealing to foreign investors in a low global yield environment.

February was an interesting month with vaccine rollout data from the US and the UK particularly positive. This, combined with continued easy monetary and fiscal conditions (including a likely further $1.9bn in stimulus in the US), was enough to ignite optimism around economic recovery enough to cause inflation expectations to rise. Bond yields subsequently rose sharply; there was an 18% rise in the price of oil over the month and there was stronger performance from areas of the market that had been more affected by the virus (smaller companies and ‘cheaper’ value companies).


SA Drivers

SA Miners Results & Vaccine Roll-out | Importance Medium

SA mining companies posted some impressive financial results with dividends at the top end of expectations. J&J vaccinations in South Africa have commenced! However, concerns relating to the
AstraZeneca vaccine’s efficacy against the South African variant have come to light.

Budget speech | Importance Medium

The speech was met with general optimism causing bonds and the rand to strengthen. Revenue “overshot” in FY20/21 and no tax hikes were announced. Bond issuance was down to R380bn from R518bn. A budget surpluses expected by 2024/25 and debt to GDP is expected to stabilize at 88.9% in 2025/26. Concerns do however remain around the implementation of public sector pay freezes.

State of the nation address | Importance High

The State of the Nation Address by President Ramaphosa paved the way for private renewable energy generation and acknowledged the plight of Eskom and other SoE’s.


Asset Class Total Returns – ZAR


Global Drivers

Fed remains dovish and supportive | Importance High

US Treasury Sec, Janet Yellen, tells G7 central bankers that “the time to go big is now”, suggesting additional fiscal stimulus should be forthcoming to support economic recovery. The US is leaning toward backing an increase in the IMF’s special drawing rights (SDRs) by as much as $500bn. Yellen also commented that “There may be sectors where we should be very careful”. A comment which added to concerns over the frothiness of growth stocks

Frigid oil & Commodity “Super Cycle” | Importance High

Oil prices surged after an “Arctic Blast” forces refinery closures and blackouts across Texas. As much as 3m barrels a day of oil output had been affected. Copper prices soared to their highest levels in 9 years boosted by rapidly tightening physical markets and prospects for rebounding economic growth. JPM and Goldman Sachs are talk of a commodities “supercycle” similar to that of the early 2000s when demand boomed in emerging nations.

Lofty Equity Markets | Importance High

Global equity markets hovered near records as risk appetite remains strong on reflation theme and vaccine recovery expectations. In the last week of the month equity markets stumbled and succumbed to profit-taking amid jitters on rising treasury yields and large rotations from growth to cyclicals.


Asset Class Total Returns – USD

All information provided courtesy of Portfolio Metrix – adapted and published with permission. No copyright infringement intended.

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