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Ok. Got itAs load-shedding intensified, the impact on inflation was varied, with headline, producer, and average inflation bagging mixed results. However, the FTSE/JSE All-share Index, domestic assets, and the property sector were all on an upward trajectory.
Are we there yet?
A formal government announcement confirmed that Russian President Putin would not be attending the BRICS summit in person, removing the uncertainty regarding the matter and an overhang for local markets. Load-shedding intensified again in July after some reprieve the prior month, while delays of the refurbishment projects to extend the life of the Koeberg Nuclear Power Plant are a cause for concern. Trucks were set alight along the Van Reenen's Pass, causing disruptions to the N3 corridor, which once again shone a light on broader logistics challenges. Transnet announced a global port management company, International Container Terminal Services Inc (ICTSI), headquartered in the Philippines, as the preferred bidder for a 25-year joint venture, which will see development and upgrades to the Durban Container Terminal Pier 2. Local economic gauges languish at weak levels, signalling weak domestic demand paired with moderating external demand.
Headline inflation for the year to June 2023 declined to 5,4% from 6,3% the previous month, with core inflation at 5,0%. While lower energy prices and base effects played a role, a continued moderation in food prices was encouraging. This brings headline inflation back in the target range of 3% to 6%. Producer inflation for June surprised to the downside at 4,8% relative to expectations for a figure of 6%. Average inflation expectations for the second quarter, as indicated by the Bureau for Economic Research (BER) survey, increased and remain above the 4,5% midpoint.
The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) kept the bank’s key lending rate on hold at 8,25%, with three members voting in favour of the pause and two for a 25 bps hike. Forecasts for headline inflation were adjusted lower for 2023 and 2024, with expectations for a moderation in headline inflation sustainably back to the 4,5% midpoint in the second half of 2025. Core inflation forecasts were also adjusted lower. In answer to questions whether the latest move signals the peak of the interest rate cycle, the MPC were at pains to highlight that the progression of interest rates would be driven by incoming data and that risks to the inflation outlook remain to the upside.
Domestic assets gained ground over the month, benefiting from gains in emerging markets. The FTSE/JSE All-bond Index gained 2,3% in July, with some foreign appetite emerging. The rand also appreciated by 5,2% against the US dollar in July, bringing the year-to-date decline to 5,0%.
The FTSE/JSE All Share gained 4,0%, with a strong showing from financials (7,9%) and a recovery in resources (3,7%). Within the financial sector, banks (8,0%), life insurance (9,6%) and non-life insurance (10,6%) recorded strong gains while retailers continued to recover, up by 12,1% in July. Mid-cap stocks staged a recovery, driven in part by gains from transaction capital (16,1%). The property sector gained 2,3% in July, leaving the year-to-date returns at -2,2%.
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Nedgroup Private Wealth (Pty) Ltd and its subsidiaries (Nedbank Private Wealth) issued this communication. Nedgroup Private Wealth is a subsidiary of Nedbank Group Limited, the holding company of Nedbank Limited. ‘Subsidiary’ and ‘holding company’ have the same meanings as in the Companies Act, 71 of 2008, and include foreign entities registered in terms of the act. There is an inherent risk in investing in any financial product. The information in this communication, including opinions, calculations, projections, monetary values and interest rates, are guidelines or estimations and for illustration purposes only. Nedbank Private Wealth is not offering or inviting anyone to conclude transactions and has no obligation to update the information in this communication. While every effort has been made to ensure the accuracy of the information, Nedbank Private Wealth and its employees, directors and agents accept no liability, whether direct, indirect or consequential, arising from any reliance on this information or from any action taken or transaction concluded as a result. Subsequent transactions are subject to the relevant terms and conditions, and all risks, including tax risk, lie with you. Nedbank Private Wealth recommends that, before concluding transactions, you obtain tax, accounting, financial and legal advice. Nedbank Private Wealth includes the following entities: Nedbank Ltd Reg No 1951/000009/06 (NCRCP16) (FSP9363). Nedgroup Private Wealth (Pty) Ltd Reg No 1997/009637/01 (FSP828). Nedgroup Private Wealth Stockbrokers (Pty) Ltd Reg No 1996/015589/07 (NCRCP59) (FSP50399), a member of the JSE. |
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We connect you to so much more than great advice. We provide insights, technical expertise, global opportunities, and a wide range of solutions and services.