Steady re­cov­ery of SA mar­ket in the course of last week

The Star Early Edition - - OPINION & ANALYSIS - Dr Chris Harmse

AF­TER the neg­a­tive do­mes­tic and global ap­petite for South African shares and bonds the pre­vi­ous in the of last week and in the light of the new min­ing char­ter, markets re­cov­ered steadily dur­ing that pe­riod.

In­vestors slowly re­turned to risky as­sets on the JSE as the rand ex­change rate re­cov­ered from weak lev­els at the be­gin­ning of the month.

The news that South Africa’s in­fla­tion rate in­creased marginally from 5.3 per­cent in April to 5.4 per­cent in May also helped fi­nan­cial markets.

A de­crease in the repo rate by the Mon­e­tary Pol­icy Com­mit­tee is still on the cards.

Stead­ied share mar­ket

The an­nounce­ment last week by the Con­sti­tu­tional Court that Par­lia­ment’s Speaker should de­cide if she wants to call for a se­cret bal­lot in the up­com­ing mo­tion of no con­fi­dence in Pres­i­dent Zuma, also stead­ied share, cap­i­tal and prop­erty markets on Fri­day.

How­ever, the state­ment by the Pub­lic Pro­tec­tor call­ing for a change of the con­sti­tu­tion to re­place the cur­rent man­date of the Re­serve Bank is still hang­ing over the head of South Africa’s credit rat­ing and has kept for­eign in­vestors jit­tery.

The rand ex­change rate traded steadily over the week and was quoted on Fri­day just af­ter the close of the JSE at R12.93/$.

Be­low R11 a litre

This is only 0.4 per­cent weaker than the R12.88 close of the pre­vi­ous Fri­day and 22c stronger than at the be­gin­ning of June.

Given the much lower price for Brent oil at R45.60 a bar­rel, it is ex­pected that the prices for both petrol and diesel will de­crease by 60c a litre on July 5.

This will mean that the price for diesel will dip in be­low R11 a litre in Gaut­eng and more than 7 per­cent lower than a year ago (R11.70).

Lower in­fla­tion

These lower fuel prices will def­i­nitely help to lower the in­fla­tion rate even more in months to come.

On the JSE, the Alsi gained 671 points or 1.3 per­cent dur­ing last week but is still only 1.7 per­cent higher than since the be­gin­ning of the year.

In­dus­trial shares were the pick of the week clos­ing on Fri­day 2.3 per­cent higher than the pre­vi­ous week.

Bat­tle to re­cover

Fi­nan­cial shares bat­tled to re­cover af­ter the an­nounce­ment of the Pub­lic Pro­tec­tor on Absa and the Re­serve Bank’s man­date. The Fi­nan­cial in­dex gained only 0.2 per­cent. Re­sources also re­cov­ered only marginally and the Re­sources 20 in­dex ended the week slightly higher at 0.3 per­cent.

Listed prop­erty con­tin­ued to in­crease steadily and ended the week 0.5 per­cent higher and is the only as­set that is still trad­ing pos­i­tive since the be­gin­ning of the month (0.9 per­cent).

Dr Chris Harmse is the chief econ­o­mist at Re­bal­ance Fund Man­agers.

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