Top 40 shines but trails world stocks
While the 16.6% gain in the JSE top 40 index over the past 12 months comfortably exceeds SA’s official inflation rate of 4.6%, it is well behind the world’s best-performing stock markets.
While the 16.6% gain in the JSE top 40 index over the past 12 months comfortably exceeds SA’s official inflation rate of 4.6%, it is well behind the world’s best-performing stock markets.
The JSE was led by randhedge shares as local investors sought protection offshore from a weak economy and political uncertainty. Faster gains in developed countries’ stock markets reflected stronger underlying economic growth. Those countries’ investors enjoyed low inflation rates, including 0.6% in Japan and 2% in the US.
According to data from Countryeconomy.com, 2017’s best-performing stock index was the PFTS in Ukraine, which rose 87%. Since the 2014 rebellion in the east, supported by Russia, Ukraine’s economy has experienced some fragile peace. The currency has stabilised, which has brought inflation under control.
Developed markets that performed strongly in 2017 were led by the US, where stimulatory policies pushed economic growth to 3.3% in the third quarter. By the end of last week, the Nasdaq had added 30.9% over 12 months, while the S&P 500 was up 22.7% to a fresh peak.
In Japan, where the official inflation rate in November rose to 0.6%, the stock market gained 23.62% to a new high, basking in the government’s policy of monetary easing and US growth. This has particularly benefited Japanese exporters to the US, such as Toyota, Sony and machine maker Komatsu.
The worst performers of the past 12 months were Venezuela’s benchmark index in Caracas, which fell 94.7%, and the Lusaka all share index in Zambia, down 27.9%, according to Countryeconomy.com.
Venezuela, which has been pursuing socialist policies since 1999, was hit by the drop in the crude oil price as it is almost entirely dependent on oil sales. Volatility on the stock exchange reflected hyperinflation — estimated at 2,616% in the last report — and the vastly overvalued official exchange rate of the bolivar against the dollar.
Recovery from the drought and rising copper prices relieved some of the pressure on the Zambian economy in 2017 but high levels of government debt and the performance of other sectors of the economy have made investors uneasy. Political infighting makes it unlikely these problems will be tackled effectively.