|Aloha Captains of Industry
As our nation celebrates its heritage and many courageously continue to seek significance and sustainability in the post-recession New South Africa, I bid you your families a warm East Coast greeting. It’s my privilege to present GENUITY’s September “MONTHLY MARKET VIEW”…
|remain unchanged (REPO 7.0%, PRIME 10.5%) after a run of consecutive cuts bringing the prime lending rate down from its peak of 15.5% (NOV 2008) with the MPC stating that although the domestic economy remains weak, signs of improvement are emerging, with some indicators already having turned while others are deteriorating more slowly. There appears to be consensus in the market amongst analysts that there’s room for one more 50basis point cut before year-end and we see the bottom of this interest rate cycle. With a call for more shareholder accountability emanating from SARB’s 89th annual general meeting on the 17th September amidst opposing rumblings from COSATU’s annual conference for state ownership and control makes for an interesting landscape as new Reserve Bank Governor Gill Marcus takes the reins. What’s evident is that the incumbent inflationary targeted policy stands for now.|
|aided by a stronger currency and declining food and fuel prices, PPI fell at -4% whilst the CPI index for August moderated further to +6.4%, again its lowest level since the peak of 13.6% (AUG 2008) and etching ever closer to the elusive 6% upper band of SARB’s target. The Reserve Bank indicated that its short-term outlook for inflation has remained largely unchanged despite irregular increases in Eskom’ and other administered prices. CPI inflation is expected to continue moderating steadily and to fall within the target range in the second quarter of 2010 and stay within the 3% to 6% range for the period ending 2011.|
|EQUITY & BONDS|
|the JSE all share index closed September at 24,856 points, continuing its steady rise from last year’s trough of 17,814 points. Again, analysts agree that greater liquidity abounded in the market last month in line with Equity markets rallying somewhat worldwide.|
|the Rand has continued to gain ground against major currencies helped by improved risk sentiment, particularly against the British Pound closing September at R11.81 to Sterling and R7.42 to the Greenback, significantly up from new year’s day trading levels of R13.45 and R9.30 respectively.|
|Mining & Manufacturing showed improved results last quarter and the annual rate of decline in Retail continued to ease suggesting that the worst of the economic slowdown may well be over. Vehicle sales improved slightly and were only down 22.4% y-on-y in September (versus 31.6% YTD). Employment in the formal non-agricultural sector decreased with the number of people employed falling to 8,26 million from 8,33 million resulting in a 2,3% decline on an annual basis. However, gross earnings have increased annually by 6,4% or R15, 631 million. Augusts’ trade deficit, the first since May this year, reflected a sharp fall in exports of minerals along with vehicles and transport equipment, while imports of capital goods also remains weak. The Government continues to tighten its purse strings as all 284 municipalities have their finances brought under the “Pravin Gordon spotlight”. The Netherlands Bureau for Economic Policy Analysis’s World Trade Monitor, which analyses trade activity covering over 95% of world trade, indicates that global trade volumes rose by 3,5% m-o-m in July, the fastest monthly increase in more than 5 years. Preliminary indications are that world trade troughed in May 2009. Trade volumes, however, remain 15,9% below their peak reached in April 2008.|
|CREDIT & MONEY SUPPLY|
|growth in total Credit fell to its lowest level in four decades since records began in 1968 as households and companies remain cautious in an uncertain environment, asset-backed Credit and in particular instalment sales and leasing finance contracted at the fastest pace on record at -4.2% y-on-y. Over the month, money supply rose modestly due to increases in net foreign assets and net claims on the government sector, which was largely offset by declines in claims on the private sector as well as other assets and liabilities.|
|internationally, the Group of 20 summit in Pittsburgh, Pennsylvania, adopted a framework for strong, sustainable and balanced economic growth which intends reducing the concentration of global economic activity on a few countries, strengthening financial regulation, reforming the global institutional architecture and bringing to conclusion the Doha round of trade talks in 2010. This will be done with the aim of preventing the reoccurrence of a severe slump in global economic activity. The G-20 will replace the G-8 as the official global economic forum and the International Monetary Fund will be given an oversight role.locally consumer confidence remains under pressure from strict lending regulation, falling household wealth and deteriorating employment conditions.
Here’s to faithful learning and real growth, patient nation building, passionate desire for the truth and long-lived family gatherings around hearty braai-vleis’ under sunny SA skies.
“self professed optimist, proudly South African businessman and financier, delighted husband and father of two”