|Aloha Captains of Industry
I trust that in your choice to live beyond recession and bravely press on down that path less travelled that this note finds you and your families fit and in good spirit. As many continue to take the strain while the first signs of spring tease the East Coast faithful, it’s my privilege to present GENUITY’s “MONTHLY MARKET VIEW”…
|remain unchanged (REPO 7.5%, PRIME 11%) after a run of consecutive cuts bringing the prime lending rate down from its peak of 15.5% (NOV 2008). There appears to be consensus in the market that the appointment of Gill Marcus as the new Reserve Bank Governor on the 19th of last month will not affect the direction of monetary policy and in particular their inflation targeting stance, despite pressure from trade unions. Prospect of further rate cuts this year as the MPC revert to quarterly meetings is unclear; on the one hand hopes were stirred by CPI etching closer to the upper ban of SARB’s target and PPI going into negative territory yet on the other hand the full extent of recent inflationary wage increases along with electricity hikes, have yet to be measured. Cautiously optimistic analysts speculate 10% as the bottom of the rate cycle.|
|the CPI index for JUNE came down to 6.9%, its lowest level since the peak of 13.6% (AUG 2008). Fuel dropping a further 21cents is no doubt welcome news.|
|EQUITY & BONDS|
|the JSE all share index closed last month just under 24,000 points, continuing its steady rise from last year’s trough of 17,814 points. Quarters of the market are showing signs of recovery with the likes of SABMiller and AngloGold posting positive Q2 results. Analysts agree that greater liquidity abounded in the market last month.|
|the Rand has continued to gain ground against major currencies closing July at R7.80 to the Greenback and R12.91 to Sterling, up from new year’s day trading levels of R9.30 and R13.45 respectively. By last month, over $42Bill had flowed into the JSE from overseas investors since March 2009 (primarily into money-market) contributing to this trend.|
|with the Services sector joining Mining & Manufacturing in negative territory last quarter, Vehicle sales down 27.4% y-on-y in July, 267,000 jobs lost this year taking our JOBLESS rate up to 23.6% and signs that Pravin Gordon is tightening the Government’s purse strings (with SARS collections down R60Bill), the recession looks set for a while. As a 283Billion US$ annual economy, SA contributes 35% of the GDP of Africa and will no doubt have a vital role to play in the recovery and ongoing development of the continent|
|CREDIT & MONEY SUPPLY|
|private sector Credit extension fell (by 4% in real terms) to its lowest rate since mid-2004 as consumers attempt to ease already high levels of indebtedness, asset-based Credit contracted 2% y-on-y along with Money supply which eased 6% in June.|
|locally consumer confidence remains under pressure from strict lending regulation, falling household wealth and deteriorating employment conditions. Internationally, although exports remain under pressure as recession continues to bite our major trading partners, the drop in imports resulted in a trade surplus. Emerging market sentiment appears to have improved resulting in vast capital inflows, perhaps linked to MOODY’s and the IMD’s recent improved assessment of SA’s risk and competitiveness respectively. Despite “industrial action season” coming to a close and whether the recession turns out (in the words of Clem Sunter) to be V or U shaped, one thing’s for sure managing the expectations of labour and the political power base amidst the economic recession will prove a great test of leadership for our new administration.
As South Africans we appear gifted with short-term memories and as did the Eskom outages and industrial action of 2007/8 fade into memory so too may the recession and challenges of 2008/9 whilst we continue to learn and build capacity under sunny skies. Who knows with short-term memories, resilience and passion for improvement, Bafana Bafana may even reach the semi-finals of the 2010 world cup.
“DURBAN’s most delighted father of newly arrived, beautiful, healthy AMBER”