Steady rand, in­fla­tion rate boost stocks

The Star Early Edition - - PRICES - Dr Chris Harmse Chief econ­o­mist Re­bal­ance Fund Man­agers

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

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

The news that South Africa’s in­fla­tion rate rose 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.

The Con­sti­tu­tional Court rul­ing on Thurs­day that the Na­tional Assem­bly Speaker has the power to de­cide if a se­cret bal­lot should be ap­plied in the mo­tion of no con­fi­dence vote in Pres­i­dent Ja­cob Zuma, also stead­ied share, cap­i­tal and prop­erty markets on Fri­day.

The press re­lease of the pub­lic pro­tec­tor call­ing for a change of the con­sti­tu­tion to al­ter the man­date of the SA Re­serve Bank, how­ever, is still hang­ing over the head of the coun­try’s credit rat­ing.

The rand traded steadily over the week and was quoted at R12.94 to the dol­lar at 5pm on Fri­day. This was only 0.4 per­cent weaker than the R12.88 close of the pre­vi­ous Fri­day and 22c stronger than the be­gin­ning of June.

Given the much lower price for Brent oil at around R45.60 a bar­rel, it is ex­pected that the prices for both petrol and diesel will de­crease by about 60c a litre on July 5. This would mean that the price for diesel would dip be­low R11 a litre in Gaut­eng and more than 7 per­cent lower than a year ago (R11.70).

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

On the JSE, the all share in­dex gained 671 points, or 1.3 per­cent, last week, but is still only 1.7 per­cent higher since the be­gin­ning of the year.

In­dus­trial shares were the pick of the week, clos­ing Fri­day 2.3 per­cent higher than the pre­vi­ous week. Fi­nan­cials shares bat­tled to re­cover af­ter the pub­lic pro­tec­tor’s an­nounce­ment on ABSA and the SA Re­serve Bank. The Fi­nan­cial in­dex gained 0.2 per­cent over the week.

The Re­sources 20 in­dex ended the week slightly higher, gain­ing by 0.3 per­cent.

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