Steady recovery of SA market in the course of last week

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.