Boom & Gloom: May 2016

Boom & Gloom

Boom & Gloom: May 2016

Our View of the Investment Markets

This table reflects our view of the relevant assets, based on expected performance.

Summary table

MACRO REVIEW

Economic Activity

The Barclays SA Manufacturing PMI spiked to 54.9 in May from 50.5 in April, while the industry wide Standard Bank SA PMI improved slightly to 47.7 in May from 40 in April.

The SACCI Business Confidence Index improved from 81.2 in April to 85.5 in May. The current level still remains close to the all-time lows experienced in 1993.

Namsa vehicle sales contracted 9.2% in May, an improvement from the 14% contraction in April. We expect the contraction to continue, although at a slower pace as the interest rate hiking cycle evolves.

Unemployment grew 26.7% year-on-year (YoY) in the first quarter of this year (up from 24.5%). This is the highest rate of unemployment in the history of the Quarterly Labour Force Survey data. The largest contributors to the rise in unemployment were trade (-3.6% quarter-on-quarter (QoQ)), manufacturing (-5.8% QoQ) and construction (-5.3% QoQ).

Mining production reduced by 3.4% month-on-month (MoM) in May from an expansion of 1.3% in April. Manufacturing production reduced by 0.3% MoM in May from 1.3% MoM in April.

Retail sales grew 2.8% YoY in May, down from the 4.1% in April, as real disposable income diminished.

External Accounts

Offshore investors sold bonds and equities in May, this has been a trend over the past nine months.

Inflation

In May inflation declined to 6.1% YoY, from 6.2% in April, driven by lower than expected food price increases. The numbers still reflect limited currency through flow. We expect elevated inflation numbers to be above the upper 6% barrier for 2016 and 2017.

Monetary Policy

The Reserve Bank’s monetary policy committee (MPC) held the repo policy interest at 7% on Thursday 19 May. The Governor, stated in a recent comment that they face a serious dilemma managing inflation due to subdued growth and high inflation.

Ratings Agency News Flow

Moody’s noted that:

  • − The economy may be reaching a turning point.
  • − It sees some improvement in growth in the next few years.
  • − The spending ceiling has been respected.
  • − Some ‘bottlenecks’ are not as pronounced.

It did however add that political decisions that risk reforms could affect ratings.

However, Fitch was somewhat more, stating that:

  • − The political will for fiscal consolidation was a risk.
  • − Challenges also include downward revisions in GDP growth estimates.

 

Rating Status

Rating

 

MARKET REVIEW

MARKET PERFORMANCE

Total return to 31/5/2016, in domestic currency

Market Perf

 

SECTOR PERFORMANCE

Total return to 31/5/2016

Sector perf

Equity performer

Equity Detractors

 

COMMODITY PERFORMANCE

Comm

 

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Eugene Goosen

Eugene Goosen

 

Source: Bloomberg LP, Credit Suisse,

Disclaimer

The information in this document is proprietary to Ora Fund Managers (Pty) Ltd (Ora) and is not to be reproduced, distributed, published or used for any purpose other than the evaluation of any proposal contained in the document, except with the written permission of a representative of Ora. The information contained in this document (together with any opinions expressed or further information provided in connection with this document) is of a general nature and provided for illustrative purposes. It does not address the circumstances of any particular person or entity and it is not a recommendation or advice in relation to any transaction or investment. In making this information available, we are not purporting to act in any way as an advisor or in a fiduciary capacity. No one should rely on any of this information without appropriate advice from an independent financial adviser, based on a thorough investigation of the investor’s specific circumstances. While we have taken care to ensure that the information is accurate and not misleading, Ora makes no representations or warranties of any kind with respect to its accuracy, completeness or correctness. The information is provided on the clear understanding that Ora will not be held liable or responsible for any loss or damages that may be suffered by any person or entity as a result of that party placing reliance on or failing to act on any of the information provided.

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