SA’s banks and retailers led a rebound on the JSE on Tuesday as the local bourse started to claw back the losses resulting from the global carnage of “liberation day” US tariffs.
Still, as savvy investors took advantage of the attractive valuations, the banks have a long way to go to recover from the losses they suffered last week when US President Donald Trump spooked markets by announcing sweeping tariffs on imports, sparking a trade war with China and raising the risk of a global recession.
Standard Bank, FirstRand, Nedbank, Absa, Investec and Capitec all ended Tuesday’s trading session higher with FirstRand leading the charge as it gained 5.2%.
Standard Bank, up 2.74%, surpassed FirstRand as the most valuable bank by market capitalisation. Led by Sim Tshabalala, the lender is also the continent’s largest by assets.
SA retailers also recovered some losses, with the sector’s leading competitors — Shoprite, Woolworths, Spar and Pick n Pay — ending the trading session in the black.
Shoprite was up 5.4%, Pick n Pay 6.5% and Woolworths 3.89%. While geopolitical and domestic political instability has wreaked havoc with the local financial markets, Momentum Investments said SA’s risk premium was still well below pre-election highs.
However, Momentum Investments head of asset allocation Herman van Papendorp said the valuations of neither SA equities nor nominal bond markets reflected significant positive sentiment about better growth potential for the country.
SA equities continued to trade about one standard deviation from historical lows against emerging market (EM) equities, he said.
“The SA equity market remains underowned within global emerging market funds, with SA currently the sixth-largest underweight in these funds,” Van Papendorp said.
"Furthermore, the exposure of local multi-asset funds to the SA equity asset class remains close to the historical lows that were reached after the February 2022 increase in the Regulation 28 foreign asset exposure limit to 45%.
“Thus, there is at least no large overhang of overexposure to SA equities by global or local investors that could induce aggressive forced selling by these investors should they ever want to reduce risk exposure in portfolios.”
While the equities market staged a recovery, the rand was still under pressure, trading at R19.68/$ at 7.30pm — a situation that market participants have said could lead to inflation and have a negative effect on the interest rate outlook.
Van Papendorp said SA assets still offered the best value for clients.
“We maintain our preference for SA over global asset classes on the back of large valuation margins of safety supporting local asset class forward returns and excessive risk premiums attached to the future fundamental outlooks for local assets,” he said.
The JSE all share index ended the day 2.51% higher, taking the performance so far this year into marginally positive territory. Before the Trump mayhem, the local bourse had risen 6.5% since the beginning of the year.
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