The outcome of the elections, which produced a government of national unity (GNU), and the improved energy supply have been a tonic for SA’s largest banks, which have added about R180bn in value in the past two months.
Since May 30, when the election results were confirmed, the JSE’s banking index has added 18.88%. Leading the gains was Capitec, up 26%, followed by FirstRand 21%, Standard 20%, Nedbank 10% and Absa 8%.
Capitec’s gain over the period represents an increase in its market cap of R56bn, with FirstRand’s up almost R60bn. The latter is the biggest of the five by market cap, with a valuation of R440bn.
Standard Bank has added nearly R48bn in value in the period, Nedbank R6.7bn and Absa R9.7bn.
The value creation is a boon for pension funds and asset managers invested in the banking sector, particularly government employees through the exposure of the Public Investment Corporation to the sector.
The reappointment of Enoch Godongwana as finance minister was also well received by the markets as it signalled that the National Treasury will stick to its fiscal consolidation path.
While the election and the formation of the GNU boosted the sector, gains are also based on the prospect of lower interest rates globally. The US Federal Reserve is expected to institute its first cut in September, after hiking rates aggressively as rampant inflation followed the end of pandemic lockdowns globally.
Dovish tone
Inflation has been stubborn, but is finally nearing the Fed’s target of 2%, with market bets now at 100% that a cut will come when its federal open market committee pronounces on rates on September 18.
The Reserve Bank’s monetary policy committee will announce its next rates decision just a day after the Fed, with governor Lesetja Kganyago striking a more dovish tone after last week’s meeting, in which the committee left rates on hold.
Another boost to the local bourse has come from the cessation of load-shedding, with the country now having gone about four months without rolling blackouts. This has caused the all share index to gain about 10% over that period.
Bloomberg reported on Tuesday that RMB Morgan Stanley said in a research note that the stage was ‘set’ for improvements in SA with lesser load-shedding, and that banks, insurers, industrials were among the most preferred sectors.
RMB Morgan Stanley said SA stocks could yield 18% returns over the next year.
The top 40, in which most pension funds are invested, is up by a similar margin, while the rand has also firmed markedly, gaining 2.5% against the dollar in the period.
It reached the year’s best level of R17.85/$ on June 21, after hitting its worst 2024 level of R19.39/$ in late February. That represents a gain of about 8%. It has, however, weakened over the past month as talk of interest rate cuts floods the market.
According to Standard Bank estimates, Eskom’s repair could generate at a minimum 1.3 percentage points GDP growth.
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