Boom & Gloom: October 2016

Boom & Gloom

Boom & Gloom: October 2016

OUR VIEW OF THE INVESTMENT MARKETS

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

Summary

Macro Review

DOMESTIC ECONOMIC ACTIVITY

Manufacturing production growth was a flat 0% year on year (YoY) in September which is down from the 2.2% YoY in August. The below table focuses on the larger contributing categories:

Domestic Equity

The recently stronger Rand could cause manufacturing to moderate.

Mining production grew 3.4% YoY in September from a revised 0.1% YoY in August. Growth in volumes were broad based with platinum group metals 10.5% YoY, iron ore 11.7% YoY and coal 6.8% YoY. Gold subtracted to the index performance and was down 7% YoY.

Retail sales increased by 1.4% YoY in September from a revised 0% YoY in August. On a monthly basis retail sales grew 0.6%. Food retailers stood out by increasing by 10.9% YoY from 2.8% YoY with general dealers contracting 0.3% YoY. The constrained consumers are still cautious to spend on non-essential items. Weak consumer confidence and weak growth in real disposable income will keep retail sales growth constrained.

EXTERNAL ACCOUNTS

Offshore investors sold R12.2 bn in bonds and sold R3.8 bn in equity in October. Year to date offshore investors bought R55.5 bn in bonds and sold R103.4 bn in equities, resulting in a net outflow of R47.9 bn.

INFLATION

Inflation for October grew by 6.4% YoY. Food accelerated by 12% YoY from 11.6% and new vehicle inflation slowed to 9.8% YoY from 11% YoY. The exchange rate pass-through remains subdued but some of the currency weakness at the end of 2015 is filtering through. Inflation will most probably stay elevated in the 4th quarter whereafter it should start to moderate in 2017. The probability of normal or above normal rain in the summer rainfall area is high which will drive food prices down in the latter part of 2017.

Market REVIEW

MARKET PERFORMANCE

Total return to 31/10/2016, in domestic currency

Market Performance

Source: Bloomberg LP

SECTOR PERFORMANCE

Total return to 31/10/2016

Sector Perf

Source: Bloomberg LP

TOP 10 JSE EQUITY PERFORMERS

Equity Perf

Source: Bloomberg LP

TOP 10 JSE EQUITY DETRACTORS

Equity Detractors

Source: Bloomberg LP

COMMODITY PERFORMANCE

Commodity

 

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Eugene Goosen

Eugene Goosen

 

Sources: Bloomberg LP, Credit Suisse, RMB, BNP Paribas

Disclaimer

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