Sentiment on economic and global prospects has shifted somewhat over the past month. While the global PMI has only edged lower, the underlying dynamics show that more countries are losing steam than are accelerating. Supply disruptions continue to dampen activity, but the pending shift from goods-intensive growth to services could ease the bottlenecks and moderate the pace of inflation.
The cyclical slowdown, chip shortages, and regulatory tightening in China have had meaningful consequences for the South African equity market. The darling of the past decade – Naspers – has buckled under the rapid regulatory tightening in China. The share price is now back at pre-Covid levels. It remains highly uncertain how far regulatory changes will go or how quickly authorities will move to their next tech targets.
Moderating growth expectations, a somewhat stronger US dollar, and global supply chain bottlenecks have weighed notably on commodity prices. While the oil price has recovered towards the post-pandemic high, platinum, palladium, and rhodium prices have slumped by 25%, 31%, and 58%, respectively, since early May, leaving price performance negative for the year-to-date. The slump in commodity prices has put pressure on the market via commodity prices, which may still have some catch-up to do. So far, the bond market has not discounted the fiscal fall-out from the lower terms of trade.
Political event risk is set to heat up as we approach the local government elections on 1 November 2021. On this score, please remember to register to vote.
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