Does another one of the low cost airlines bite the DUST !!
Moneyweb REF :
"CEO outlines plan to turnaround the airline.
JOHANNESBURG - Airline 1time Holdings has more liabilities than assets, casting “significant doubt” on its existence, 1time’s auditors said.
Liabilities exceed assets by R295 million, Nexia SAB&T said in a statement distributed on Thursday by 1time.
The low-cost airline’s CEO Blacky Komani told the SAfm Market Update with Moneyweb “when you make these losses, they are quite substantial. But what we've done is to approach a South African-based institution to say we need to refinance our fleet, because part of our big loss is based on the leasing costs that are paid in foreign currency. So we make losses on foreign currency conversion, as well as on the interest rate. So we've taken a view that a three-year strategy is what we need to have. Year one, contain the costs; year two, get to break-even point; and year three get to a profitable situation”.
Komani also added that the company would become more flexible in the scheduling of its flights and consider flying to other destinations in southern Africa.
Monday, 30 April 2012
Friday, 27 April 2012
Breaking News : US economic growth slows to 2.2%
FT.com :
The US economy grew at a slower pace of 2.2 per cent in the first quarter after recording 3 per cent growth in the fourth quarter. Economists surveyed by Bloomberg had expected growth of 2.5 per cent.
The US economy grew at a slower pace of 2.2 per cent in the first quarter after recording 3 per cent growth in the fourth quarter. Economists surveyed by Bloomberg had expected growth of 2.5 per cent.
Wednesday, 25 April 2012
Get set for one of the shortest recessions on record
What now !!
2 hours ago they speaking recession, now this !!
"Provided the recessionary rhetoric at home and the dark clouds over the eurozone do not choke off the confidence that is beginning to return to Britain’s high streets and board rooms, this should be one of the shortest recessions on record."
2 hours ago they speaking recession, now this !!
"Provided the recessionary rhetoric at home and the dark clouds over the eurozone do not choke off the confidence that is beginning to return to Britain’s high streets and board rooms, this should be one of the shortest recessions on record."
Breaking News - UK falls back into recession
Breaking News
UK falls back into recession
The UK slipped back into recession, led by a decline in the construction sector, official data released on Wednesday showed.
Britain’s economy contracted by 0.2 per cent in the three months through March following a 0.3 per cent decline in the last quarter of 2011. Many economists define two successive quarters of a decline in output which many economists define as a recession.
However, in recent weeks, some economists have questioned the accuracy of the official data from the Office for National Statistics, noting that industry surveys from the services, manufacturing and construction sectors show much stronger growth.
UK falls back into recession
The UK slipped back into recession, led by a decline in the construction sector, official data released on Wednesday showed.
Britain’s economy contracted by 0.2 per cent in the three months through March following a 0.3 per cent decline in the last quarter of 2011. Many economists define two successive quarters of a decline in output which many economists define as a recession.
However, in recent weeks, some economists have questioned the accuracy of the official data from the Office for National Statistics, noting that industry surveys from the services, manufacturing and construction sectors show much stronger growth.
Tuesday, 24 April 2012
Petrol Price in SA " The Only Way is UP
Just heard today in SA that the Petrol Price is going UP next month again another 20c for so !!
No need to worry about other inflation factors Petrol price changes will drive all those factor up further !!!
Take Heed !! - 12 to the L mark my words a new high sooner then we imagine !!
No need to worry about other inflation factors Petrol price changes will drive all those factor up further !!!
Take Heed !! - 12 to the L mark my words a new high sooner then we imagine !!
Tuesday, 17 April 2012
India cuts rates by 50bp in growth gamble
Financial Times .com
India’s central bank cut key lending rates for the first time in three years on Tuesday in an aggressive effort to stimulate growth and boost investment at a time when the shine is rapidly coming off Asia’s third largest economy.
The Reserve Bank of India cut the repo rate – the rate at which the central bank lends to commercial banks – by a more than expected 50 basis points to 8 per cent. The reduction was widely welcomed by business
India’s central bank cut key lending rates for the first time in three years on Tuesday in an aggressive effort to stimulate growth and boost investment at a time when the shine is rapidly coming off Asia’s third largest economy.
The Reserve Bank of India cut the repo rate – the rate at which the central bank lends to commercial banks – by a more than expected 50 basis points to 8 per cent. The reduction was widely welcomed by business
Monday, 16 April 2012
Forget about Europe – the only thing to worry about is interest rates
Great Article puts things in perspective !!
These days you can count yourself lucky if you pick up a newspaper and do not find some pundit’s article about the European sovereign debt crisis and suggestions of how to fix it; not to mention endless predictions about the Chinese economy and the US budget deficits....and the list goes on and on.
Although some of these articles portray the immense knowledge and understanding that certain individuals have about these issues, unless you are George Soros or Ray Dalio, your chances of successfully adjusting your allocation between stocks, bonds and cash based on news flow around macro issues might prove less than successful.
One of the very few economic indicators, in our view, that should influence your asset allocation decisions is interest rates, and more the directional changes than the actual number. The other factors, as mentioned above, makes for interesting conversations, but is fairly useless when it comes to picking stocks or allocating between asset classes. The prime lending rate that is determined by the repo rate as set by the Reserve Bank is the price of money that in turn influences the prices of all the other asset classes.
In Graph 1 the relationship between the rate of change in the earnings yield (inverse of the PE) of Industrial stocks and the rate of change in South African interest rates is quite evident. We can see that there have been quite a few times in the past where the earnings yield of industrial companies have increased by 20% to 40%, which translates into a material de-rating in the price-to-earnings multiple of these stocks.
Why is this important? When measured over long periods of time, the return from stocks is equal to the growth in profits, plus the dividend yield, plus the change in the rating over the holding period. Over many decades, the value add from this rating change provides very little to returns, but over short periods, can have a meaningful impact on stock returns. Interestingly the PE changes of the market mostly coincide with the changes in interest rates, and if there is one certainty in life, it is the fact that interest rates are cyclical.
The best proxy for the growth in profits that we should expect from industrial companies is Nominal GDP growth, or in the second graph, we have used Personal Consumption Expenditure (nominal terms), as reported in the South African National Accounts. Although profit growth tends to be more volatile over shorter periods, the average since 1961 has been 12.3% per annum, against the 13.1% growth in Personal Consumption Expenditure. It is important to note that growth in Personal Consumption Expenditure is also exactly the same as the growth in Personal Disposable Income since 1961.
If Personal Consumption Expenditure can grow at 10%, which assumes 5% Inflation and real growth of 5%, we can assume that profits from industrial companies can grow at the same rate over the next few years. This return plus a dividend yield of roughly 3% can deliver a 44% compounded nominal return over the next three years, if we assume no changes in the price-to-earnings ratio from current levels.
If we look again at the first graph though, we can see that any upward move in interest rates should translate, with a slight time lag, into at least a similar upward adjustment to the earnings yield, which means a de-rating in the industrial universe’s PE. Depending on how large the interest rate adjustment is, this could have a significant impact on real returns from industrial stocks over the next few years. In the event that interest rates rise by 200 basis points over the next two to three years, around half of the total returns mentioned in the previous paragraph could be wiped out. This leaves a compounded annual growth rate of roughly 4%, in nominal terms, assuming the de-rating only takes us to an average rating. As we all know though, the rating adjustment swings between extreme lows and extreme highs in order to generate an average and thus the 4% nominal returns that we mentioned, could be optimistic.
Two final thoughts: Firstly, nothing beats the returns achieved by investing in good, and surprisingly often, smaller companies, after diligent homework. The best strategy with these companies is generally to leave them and let the returns compound over many years. This is well illustrated with the Industrial Index that has provided a compounded annualised real return of almost 18% since the market bottom in 2003, despite the market-crash in 2008.
Secondly, while we ascribe most returns to stock selection, we do believe that value can be added by diligently allocating between stocks, listed property, cash and bonds as the relative valuations change. The best indicator in this regard is the direction of interest rates. Monitoring the rating adjustments relative to interest rates is a good indicator of mispricings in the market. Our view is that the re-rating of industrial stocks since the beginning of 2009 has been predominantly driven by the decline in interest rates over the same period. Interest rates are possibly at their low point in this cycle – real interest rates are the lowest they have been since 1988. In the event that interest rates move higher from current levels, significant growth in profits would be required to sustain attractive real returns from industrial companies. This being more than we think is achievable in the long run.
REF : Neels van Schaik - PSG ASSET MANAGEMENT
"The PSG Angle is an electronic newsletter of PSG Asset Management. To subscribe or read more, please go to to www.psgam.co.za".
These days you can count yourself lucky if you pick up a newspaper and do not find some pundit’s article about the European sovereign debt crisis and suggestions of how to fix it; not to mention endless predictions about the Chinese economy and the US budget deficits....and the list goes on and on.
Although some of these articles portray the immense knowledge and understanding that certain individuals have about these issues, unless you are George Soros or Ray Dalio, your chances of successfully adjusting your allocation between stocks, bonds and cash based on news flow around macro issues might prove less than successful.
One of the very few economic indicators, in our view, that should influence your asset allocation decisions is interest rates, and more the directional changes than the actual number. The other factors, as mentioned above, makes for interesting conversations, but is fairly useless when it comes to picking stocks or allocating between asset classes. The prime lending rate that is determined by the repo rate as set by the Reserve Bank is the price of money that in turn influences the prices of all the other asset classes.
In Graph 1 the relationship between the rate of change in the earnings yield (inverse of the PE) of Industrial stocks and the rate of change in South African interest rates is quite evident. We can see that there have been quite a few times in the past where the earnings yield of industrial companies have increased by 20% to 40%, which translates into a material de-rating in the price-to-earnings multiple of these stocks.
Why is this important? When measured over long periods of time, the return from stocks is equal to the growth in profits, plus the dividend yield, plus the change in the rating over the holding period. Over many decades, the value add from this rating change provides very little to returns, but over short periods, can have a meaningful impact on stock returns. Interestingly the PE changes of the market mostly coincide with the changes in interest rates, and if there is one certainty in life, it is the fact that interest rates are cyclical.
The best proxy for the growth in profits that we should expect from industrial companies is Nominal GDP growth, or in the second graph, we have used Personal Consumption Expenditure (nominal terms), as reported in the South African National Accounts. Although profit growth tends to be more volatile over shorter periods, the average since 1961 has been 12.3% per annum, against the 13.1% growth in Personal Consumption Expenditure. It is important to note that growth in Personal Consumption Expenditure is also exactly the same as the growth in Personal Disposable Income since 1961.
If Personal Consumption Expenditure can grow at 10%, which assumes 5% Inflation and real growth of 5%, we can assume that profits from industrial companies can grow at the same rate over the next few years. This return plus a dividend yield of roughly 3% can deliver a 44% compounded nominal return over the next three years, if we assume no changes in the price-to-earnings ratio from current levels.
If we look again at the first graph though, we can see that any upward move in interest rates should translate, with a slight time lag, into at least a similar upward adjustment to the earnings yield, which means a de-rating in the industrial universe’s PE. Depending on how large the interest rate adjustment is, this could have a significant impact on real returns from industrial stocks over the next few years. In the event that interest rates rise by 200 basis points over the next two to three years, around half of the total returns mentioned in the previous paragraph could be wiped out. This leaves a compounded annual growth rate of roughly 4%, in nominal terms, assuming the de-rating only takes us to an average rating. As we all know though, the rating adjustment swings between extreme lows and extreme highs in order to generate an average and thus the 4% nominal returns that we mentioned, could be optimistic.
Two final thoughts: Firstly, nothing beats the returns achieved by investing in good, and surprisingly often, smaller companies, after diligent homework. The best strategy with these companies is generally to leave them and let the returns compound over many years. This is well illustrated with the Industrial Index that has provided a compounded annualised real return of almost 18% since the market bottom in 2003, despite the market-crash in 2008.
Secondly, while we ascribe most returns to stock selection, we do believe that value can be added by diligently allocating between stocks, listed property, cash and bonds as the relative valuations change. The best indicator in this regard is the direction of interest rates. Monitoring the rating adjustments relative to interest rates is a good indicator of mispricings in the market. Our view is that the re-rating of industrial stocks since the beginning of 2009 has been predominantly driven by the decline in interest rates over the same period. Interest rates are possibly at their low point in this cycle – real interest rates are the lowest they have been since 1988. In the event that interest rates move higher from current levels, significant growth in profits would be required to sustain attractive real returns from industrial companies. This being more than we think is achievable in the long run.
REF : Neels van Schaik - PSG ASSET MANAGEMENT
"The PSG Angle is an electronic newsletter of PSG Asset Management. To subscribe or read more, please go to to www.psgam.co.za".
Thursday, 12 April 2012
Oil market pressures easing, says IEA
FT.com
The tide has turned on global oil markets, with the tightness seen over the past two years finally beginning to ease, the International Energy Agency said in its closely watched monthly oil market report on Thursday.
But “ongoing geopolitical uncertainties”, particularly over Iran’s nuclear programme, meant that for now the market easing was not translating into significantly lower oil prices, the IEA said.
The Paris-based oil watchdog, which advises the industrialised countries on energy policy, said that first-quarter supply and demand fundamentals “show a clear shift from the seemingly relentless tightening evident over the prior ten quarters”.
http://link.ft.com/r/3JFELL/WTDCLO/JIPUIZ/ORGFJV/R34364/UP/h?a1=2012&a2=4&a3=12
The tide has turned on global oil markets, with the tightness seen over the past two years finally beginning to ease, the International Energy Agency said in its closely watched monthly oil market report on Thursday.
But “ongoing geopolitical uncertainties”, particularly over Iran’s nuclear programme, meant that for now the market easing was not translating into significantly lower oil prices, the IEA said.
The Paris-based oil watchdog, which advises the industrialised countries on energy policy, said that first-quarter supply and demand fundamentals “show a clear shift from the seemingly relentless tightening evident over the prior ten quarters”.
http://link.ft.com/r/3JFELL/WTDCLO/JIPUIZ/ORGFJV/R34364/UP/h?a1=2012&a2=4&a3=12
Asian Stocks Halt Six-Day Losing Streak as Aussie Gains
REF : Bloomberg
"April 12 (Bloomberg) -- Asian stocks snapped the longest losing streak in eight months, U.S. equity-index futures gained and copper rose for a second day as Citigroup Inc. recommended buying industrial shares. The Australian dollar strengthened on data showing faster-than-estimated job growth in the country.
The MSCI Asia Pacific Index climbed 0.3 percent as of 1:20 p.m. in Tokyo, rising for the first time in seven days. The Hang Seng China Enterprises Index rallied 0.7 percent and Standard & Poor’s 500 Index futures added 0.3 percent. The Australian dollar increased 0.7 percent to a one-week high. Copper rose 0.6 percent to lead gains in metals.
Italy will auction bonds today as rising borrowing costs in Europe reflect concern the debt crisis is worsening. Federal Reserve Vice Chairman Janet Yellen said low U.S. interest rates are warranted as the job market remains weak. Australian payrolls increased by 44,000 in March, government data showed, beating the estimate for a gain of 6,500 from a Bloomberg survey of economists.
“Asia still looks really cheap,” Chong Yoon-Chou, the Singapore-based investment director at Aberdeen Asset Management Asia Ltd., said in a Bloomberg Television interview. The company oversees about $295 billion. “If you’re seeing it through the next year or two years, there are still good valuations.”
Earnings Season
The earnings season in the U.S. is beginning with Google Inc. scheduled to release results after the close of trading today. Fast Retailing Co., Asia’s biggest clothing retailer, and Lawson Inc., Japan’s second-largest convenience-store chain, are also set to report results.
Hong Kong’s Hang Seng Index climbed 0.4 percent and Australia’s S&P/ASX 200 Index added 0.6 percent. South Korea’s Kospi index slid 1 percent as trading resumed after a holiday.
The Shanghai Composite Index gained 0.4 percent. China may cut interest rates in the “immediate future” as inflation isn’t too high to prevent further easing of monetary policy, Michael Kurtz, the chief Asian equity strategist at Nomura Holdings Inc., wrote in a report dated yesterday.
Industrial stocks in the MSCI Asia Pacific Index added 0.6 percent for the second-biggest advance among 10 industries. Fanuc Corp., a maker of robots used in factories, climbed 1.4 percent in Tokyo. Citigroup said the industry has “solid” earnings and cash levels are at a record high, according to a research report dated yesterday.
Copper, Yen
Copper rose as much as 0.7 percent. The China Association of Automobile Manufacturers said yesterday deliveries of passenger cars climbed 4.5 percent to 1.4 million units last month. Sales were projected to increase 3.9 percent, according to the average estimate of a Bloomberg News survey of eight analysts. Oil traded near the highest price in a week in New York, while natural gas futures remained below $2 per million British thermal units.
The yen extended declines to a second day, falling against all of its 16 major counterparts, after Bank of Japan Governor Masaaki Shirakawa said he will continue pursuing monetary easing. The Japanese currency sank 0.2 percent to 106.23 per euro.
The yen has weakened 7.6 percent in the past three months, the biggest decline among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar is the second-worst performer with a 2 percent drop during the period. "
To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net ; Rishaad Salamat in Hong Kong at rishaad@bloomberg.net
===
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
"April 12 (Bloomberg) -- Asian stocks snapped the longest losing streak in eight months, U.S. equity-index futures gained and copper rose for a second day as Citigroup Inc. recommended buying industrial shares. The Australian dollar strengthened on data showing faster-than-estimated job growth in the country.
The MSCI Asia Pacific Index climbed 0.3 percent as of 1:20 p.m. in Tokyo, rising for the first time in seven days. The Hang Seng China Enterprises Index rallied 0.7 percent and Standard & Poor’s 500 Index futures added 0.3 percent. The Australian dollar increased 0.7 percent to a one-week high. Copper rose 0.6 percent to lead gains in metals.
Italy will auction bonds today as rising borrowing costs in Europe reflect concern the debt crisis is worsening. Federal Reserve Vice Chairman Janet Yellen said low U.S. interest rates are warranted as the job market remains weak. Australian payrolls increased by 44,000 in March, government data showed, beating the estimate for a gain of 6,500 from a Bloomberg survey of economists.
“Asia still looks really cheap,” Chong Yoon-Chou, the Singapore-based investment director at Aberdeen Asset Management Asia Ltd., said in a Bloomberg Television interview. The company oversees about $295 billion. “If you’re seeing it through the next year or two years, there are still good valuations.”
Earnings Season
The earnings season in the U.S. is beginning with Google Inc. scheduled to release results after the close of trading today. Fast Retailing Co., Asia’s biggest clothing retailer, and Lawson Inc., Japan’s second-largest convenience-store chain, are also set to report results.
Hong Kong’s Hang Seng Index climbed 0.4 percent and Australia’s S&P/ASX 200 Index added 0.6 percent. South Korea’s Kospi index slid 1 percent as trading resumed after a holiday.
The Shanghai Composite Index gained 0.4 percent. China may cut interest rates in the “immediate future” as inflation isn’t too high to prevent further easing of monetary policy, Michael Kurtz, the chief Asian equity strategist at Nomura Holdings Inc., wrote in a report dated yesterday.
Industrial stocks in the MSCI Asia Pacific Index added 0.6 percent for the second-biggest advance among 10 industries. Fanuc Corp., a maker of robots used in factories, climbed 1.4 percent in Tokyo. Citigroup said the industry has “solid” earnings and cash levels are at a record high, according to a research report dated yesterday.
Copper, Yen
Copper rose as much as 0.7 percent. The China Association of Automobile Manufacturers said yesterday deliveries of passenger cars climbed 4.5 percent to 1.4 million units last month. Sales were projected to increase 3.9 percent, according to the average estimate of a Bloomberg News survey of eight analysts. Oil traded near the highest price in a week in New York, while natural gas futures remained below $2 per million British thermal units.
The yen extended declines to a second day, falling against all of its 16 major counterparts, after Bank of Japan Governor Masaaki Shirakawa said he will continue pursuing monetary easing. The Japanese currency sank 0.2 percent to 106.23 per euro.
The yen has weakened 7.6 percent in the past three months, the biggest decline among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar is the second-worst performer with a 2 percent drop during the period. "
To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net ; Rishaad Salamat in Hong Kong at rishaad@bloomberg.net
===
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Wednesday, 11 April 2012
Breaking News : Apple sued over ebook pricing
REF : Financial Times.com
The Department of Justice has sued Apple and five of the largest book publishers, alleging that they colluded to increase the price of ebooks, saying that a change to the industry’s model at the time Apple launched its iPad tablet has cost consumers “tens of millions of dollars”.
Sources close to the publishers said the DoJ was expected to immediately settle with three of the five publishers: Hachette, HarperCollins and Simon & Schuster.
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
The Department of Justice has sued Apple and five of the largest book publishers, alleging that they colluded to increase the price of ebooks, saying that a change to the industry’s model at the time Apple launched its iPad tablet has cost consumers “tens of millions of dollars”.
Sources close to the publishers said the DoJ was expected to immediately settle with three of the five publishers: Hachette, HarperCollins and Simon & Schuster.
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Asia Stocks Drop on Europe; S&P 500 Futures, Copper Gain
"April 11 (Bloomberg) -- Asian stocks fell for a sixth day, the longest stretch of losses since August, and bond risk in the region rose after Sony Corp. posted a record loss and concern grew that Europe’s debt crisis is worsening. U.S. equity futures climbed as Alcoa Inc. reported an unexpected profit.
The MSCI Asia Pacific Index lost 0.9 percent as of 1:05 p.m. in Tokyo. Standard & Poor’s 500 Index futures added 0.3 percent following a 1.7 percent slump in the equity gauge yesterday. Ten-year Treasury yields rose two basis points to 2 percent. The Australian dollar rose against all 16 major counterparts. Copper and aluminum gained at least 0.5 percent. Oil rose 0.2 percent to $101.20 a barrel in New York.
Sony and Sharp Corp., Japan’s biggest makers of liquid- crystal-display televisions, posted losses totaling 900 billion yen ($11 billion) as global demand weakened for the first time in six years. The U.S. Federal Reserve is scheduled to release its Beige Book business survey later today and Italy will sell 11 billion euros ($14.4 billion) of bills. Spanish Prime Minister Mariano Rajoy said yesterday that the nation’s future is at stake in its battle to tame surging bond yields.
“Spain is in a very difficult situation and more likely than not to require some type of official intervention,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “We are likely to have another very difficult day in the market.”
Spanish Bonds
With Spanish bonds trading closer to levels that prompted Greece, Ireland and Portugal to seek European bailouts, Rajoy will address lawmakers of his People’s Party today to explain the deepest budget cuts in three decades. Spain’s 10-year yields touched 5.99 percent yesterday, the most since Dec. 12.
Six stocks fell for each that rose in the MSCI Asia Pacific Index. The Nikkei 225 Stock Average lost 1.3 percent for a seventh day of losses, the longest period of declines since July 2009. Hong Kong’s Hang Seng Index retreated 1.3 percent and Australia’s S&P/ASX 200 Index slid 0.9 percent. Markets in South Korea and Malaysia are closed for holidays.
Sony tumbled 5 percent. The company had a loss of 520 billion yen for the year ended March 31, it said yesterday after the close of trading in Tokyo. Sharp slid 3.4 percent after reporting a 380 billion yen full-year loss.
Alcoa Earnings
Gains in S&P 500 futures indicate the equity benchmark may snap a five-day losing streak when markets open in New York. The S&P 500’s slump yesterday was the biggest retreat this year. Shares of Alcoa, the largest U.S. aluminum producer, rallied 5.4 percent in after-hours trading.
Earnings from S&P 500 companies, excluding financials, may rise 0.6 percent in the first and second quarters from a year earlier, according to analyst estimates compiled by Bloomberg. That would be the slowest growth since 2009.
Aluminum advanced from the lowest level in three months, climbing 0.8 percent. Copper rose 0.5 percent as Japan’s machinery orders exceeded all economists’ estimates in February.
The cost of insuring Asia-Pacific bonds from default increased, according to traders of credit-default swaps. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 5 basis points to 172.5, Royal Bank of Scotland Group Plc prices show. The measure is on course for its highest close since Feb. 1, according to CMA.
The Australian dollar strengthened 0.3 percent to $1.0281. New Zealand’s currency advanced 0.3 percent to 81.71 U.S. cents.
Three-month non-deliverable forwards for South Korea’s won dropped to their weakest level since January on concern the ruling party will lose control of parliament in an election today amid escalating tensions with the North, which is set to launch a long-range rocket in coming days. The contracts declined 0.3 percent to 1,153.25 per dollar in Hong Kong.
“The North Korea and election issues are all adding to negative sentiment on the won at a time when we are seeing general risk-off sentiment in the markets,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. "
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net
===
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
The MSCI Asia Pacific Index lost 0.9 percent as of 1:05 p.m. in Tokyo. Standard & Poor’s 500 Index futures added 0.3 percent following a 1.7 percent slump in the equity gauge yesterday. Ten-year Treasury yields rose two basis points to 2 percent. The Australian dollar rose against all 16 major counterparts. Copper and aluminum gained at least 0.5 percent. Oil rose 0.2 percent to $101.20 a barrel in New York.
Sony and Sharp Corp., Japan’s biggest makers of liquid- crystal-display televisions, posted losses totaling 900 billion yen ($11 billion) as global demand weakened for the first time in six years. The U.S. Federal Reserve is scheduled to release its Beige Book business survey later today and Italy will sell 11 billion euros ($14.4 billion) of bills. Spanish Prime Minister Mariano Rajoy said yesterday that the nation’s future is at stake in its battle to tame surging bond yields.
“Spain is in a very difficult situation and more likely than not to require some type of official intervention,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “We are likely to have another very difficult day in the market.”
Spanish Bonds
With Spanish bonds trading closer to levels that prompted Greece, Ireland and Portugal to seek European bailouts, Rajoy will address lawmakers of his People’s Party today to explain the deepest budget cuts in three decades. Spain’s 10-year yields touched 5.99 percent yesterday, the most since Dec. 12.
Six stocks fell for each that rose in the MSCI Asia Pacific Index. The Nikkei 225 Stock Average lost 1.3 percent for a seventh day of losses, the longest period of declines since July 2009. Hong Kong’s Hang Seng Index retreated 1.3 percent and Australia’s S&P/ASX 200 Index slid 0.9 percent. Markets in South Korea and Malaysia are closed for holidays.
Sony tumbled 5 percent. The company had a loss of 520 billion yen for the year ended March 31, it said yesterday after the close of trading in Tokyo. Sharp slid 3.4 percent after reporting a 380 billion yen full-year loss.
Alcoa Earnings
Gains in S&P 500 futures indicate the equity benchmark may snap a five-day losing streak when markets open in New York. The S&P 500’s slump yesterday was the biggest retreat this year. Shares of Alcoa, the largest U.S. aluminum producer, rallied 5.4 percent in after-hours trading.
Earnings from S&P 500 companies, excluding financials, may rise 0.6 percent in the first and second quarters from a year earlier, according to analyst estimates compiled by Bloomberg. That would be the slowest growth since 2009.
Aluminum advanced from the lowest level in three months, climbing 0.8 percent. Copper rose 0.5 percent as Japan’s machinery orders exceeded all economists’ estimates in February.
The cost of insuring Asia-Pacific bonds from default increased, according to traders of credit-default swaps. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 5 basis points to 172.5, Royal Bank of Scotland Group Plc prices show. The measure is on course for its highest close since Feb. 1, according to CMA.
The Australian dollar strengthened 0.3 percent to $1.0281. New Zealand’s currency advanced 0.3 percent to 81.71 U.S. cents.
Three-month non-deliverable forwards for South Korea’s won dropped to their weakest level since January on concern the ruling party will lose control of parliament in an election today amid escalating tensions with the North, which is set to launch a long-range rocket in coming days. The contracts declined 0.3 percent to 1,153.25 per dollar in Hong Kong.
“The North Korea and election issues are all adding to negative sentiment on the won at a time when we are seeing general risk-off sentiment in the markets,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. "
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net
===
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Tuesday, 10 April 2012
Petrol vs. oil - chart - Good Article for South Africa !!
Petrol vs. oil - chart
Category: Research
Petrol goes up again (midnight on Tuesday) and 95 unleaded on the reef will now be 1194c a litre!
Below is the chart of petrol since January 2006 vs. the oil price*. Certainly there is a link of sorts, but you can also see the impact of the Rand and extra taxes and dealer margin coming in, especially in 2012 as oil has moved little while petrol has marched higher and the April increase includes the increased levy which in part is to pay for the new Gautang toll roads.
For petrol to move lower we need weaker oil and stronger Rand - and quickly.
Petrol vs. oil - chart
Sources;
Petrol price - AA of SA
WTI price - Index Mundi
* - Simple average of three spot prices; Dated Brent, West Texas Intermediate, and the Dubai Fateh, US Dollars per Barrel
REF :Simon Brown
Category: Research
Petrol goes up again (midnight on Tuesday) and 95 unleaded on the reef will now be 1194c a litre!
Below is the chart of petrol since January 2006 vs. the oil price*. Certainly there is a link of sorts, but you can also see the impact of the Rand and extra taxes and dealer margin coming in, especially in 2012 as oil has moved little while petrol has marched higher and the April increase includes the increased levy which in part is to pay for the new Gautang toll roads.
For petrol to move lower we need weaker oil and stronger Rand - and quickly.
Petrol vs. oil - chart
Sources;
Petrol price - AA of SA
WTI price - Index Mundi
* - Simple average of three spot prices; Dated Brent, West Texas Intermediate, and the Dubai Fateh, US Dollars per Barrel
REF :Simon Brown
Breaking News - Slowing imports push China back to trade surplus
A lot of this back & forward !!
Can't always agree what is your comment !!
Breaking News
Slowing imports push China back to trade surplus
China’s trade balance shifted back into positive territory in March as exports from the world’s biggest trader of goods accelerated and imports slowed, according to government data released Tuesday.
Exports in March increased 8.9 per cent from the same month last year while imports rose 5.3 per cent, leaving the country with a $5.4bn trade surplus for the month and a $670m surplus for the year so far.
BRIEF-RESEARCH ALERT-Goldman raises Anglo American Platinum target AMSJ.J - RTRS
April 10 (Reuters) - Anglo American Platinum Ltd AMSJ.J:
Goldman raises Anglo American Platinum AMSJ.J price target to 480 rand from
460 rand; rating sell
Goldman raises Anglo American Platinum AMSJ.J price target to 480 rand from
460 rand; rating sell
Wednesday, 4 April 2012
AUSTRALIAN STOCK CLOSE: 4 April 2012
"Australian shares closed marginally lower Wednesday, recovering some ground in late trading after falling on weaker-than-expected trade data just before midday.
The benchmark S&P/ASX 200 closed 3.1 points lower at 4333.9 points, bouncing from a dip to 4317.2 after Australia posted its second consecutive monthly trade deficit.
"Jitters from the trade balance figures didn't last long as some investors saw this as further confirmation that the [central bank] will act on rates," said Stan Shamu, market analyst at IG Markets, in a note.
Australia recorded a trade deficit of 480 million Australian dollars (US$493.2 million) in February, which surprised economists who were expecting, on average, a surplus of around A$1.1 billion. Exports fell 2% and imports dropped 4%, the Australian Bureau of Statistics said, with coal exports falling 16% as mining was hit by bad weather and strikes.
The Australian dollar also fell on the export data, which strengthened expectations of an interest rate cut by the Reserve Bank of Australia. The RBA left the official cash rate on hold at 4.25% on Tuesday, but indicated it would look at first quarter inflation data due later this month before potentially moving to cut rates.
Australia's share market opened lower after negative leads from the U.S. and investor concerns that the U.S. Federal Reserve gave no hints about the possibility of future economic stimulus measures from its most recent meeting.
Falls in Australia's resources and industrial sectors during the day were counterbalanced by gains in financial and defensive stocks.
Ben Le Brun, market analyst at OptionsXpress, said QBE Insurance, which closed 3.4% higher after it reaffirmed guidance of an insurance profit margin of 13% and bought the renewal rights of Brit Insurance's regional operations, helped lift the financial sector.
Three of the big four banks were higher, with Westpac, ANZ Bank and National Australia Bank up 1.4%-0.1%, while Commonwealth Bank of Australia fell 0.3%.
Health care companies with overseas earnings rose, helped by the weaker Australian dollar, with CSL up 1.5%, ResMed up 2.7% and Cochlear up 1.6%.
Australia's big miners were down on lower commodity prices and expectations of further weakness in the face of a stronger U.S. dollar. BHP Billiton was down 1.3%, Fortescue Metals Group down 1%, Rio Tinto down 0.6% and Newcrest Mining down 2.4%.
Transfield Services fell 11.7% following its third profit downgrade since August on Tuesday. "
Source: Dow Jones Newswires.
The benchmark S&P/ASX 200 closed 3.1 points lower at 4333.9 points, bouncing from a dip to 4317.2 after Australia posted its second consecutive monthly trade deficit.
"Jitters from the trade balance figures didn't last long as some investors saw this as further confirmation that the [central bank] will act on rates," said Stan Shamu, market analyst at IG Markets, in a note.
Australia recorded a trade deficit of 480 million Australian dollars (US$493.2 million) in February, which surprised economists who were expecting, on average, a surplus of around A$1.1 billion. Exports fell 2% and imports dropped 4%, the Australian Bureau of Statistics said, with coal exports falling 16% as mining was hit by bad weather and strikes.
The Australian dollar also fell on the export data, which strengthened expectations of an interest rate cut by the Reserve Bank of Australia. The RBA left the official cash rate on hold at 4.25% on Tuesday, but indicated it would look at first quarter inflation data due later this month before potentially moving to cut rates.
Australia's share market opened lower after negative leads from the U.S. and investor concerns that the U.S. Federal Reserve gave no hints about the possibility of future economic stimulus measures from its most recent meeting.
Falls in Australia's resources and industrial sectors during the day were counterbalanced by gains in financial and defensive stocks.
Ben Le Brun, market analyst at OptionsXpress, said QBE Insurance, which closed 3.4% higher after it reaffirmed guidance of an insurance profit margin of 13% and bought the renewal rights of Brit Insurance's regional operations, helped lift the financial sector.
Three of the big four banks were higher, with Westpac, ANZ Bank and National Australia Bank up 1.4%-0.1%, while Commonwealth Bank of Australia fell 0.3%.
Health care companies with overseas earnings rose, helped by the weaker Australian dollar, with CSL up 1.5%, ResMed up 2.7% and Cochlear up 1.6%.
Australia's big miners were down on lower commodity prices and expectations of further weakness in the face of a stronger U.S. dollar. BHP Billiton was down 1.3%, Fortescue Metals Group down 1%, Rio Tinto down 0.6% and Newcrest Mining down 2.4%.
Transfield Services fell 11.7% following its third profit downgrade since August on Tuesday. "
Source: Dow Jones Newswires.
*CITIGROUP LIFTS SOUTH AFRICA EQUITIES TO OVERWEIGHT ON EARNINGS
Interesting look : SA the way to tap into African Markets !!
"April 4 (Bloomberg) -- Citigroup Inc. raised South African equities to overweight, the equivalent of buy, on expected strong earnings growth and companies’ expansion into Africa’s fast-growing frontier markets, the bank said.
Citi analysts forecast South African companies will grow earnings about 20 percent this year, one of the highest rates among emerging markets, it said in a report yesterday. The country’s economy may grow 3 percent to 4 percent next year, while the bank does not expect interest rates to rise until the second half of this year, it said."
To contact the reporter on this story:
Stephen Gunnion: sgunnion@bloomberg.net
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Tuesday, 3 April 2012
AUSTRALIAN CLOSE 3 APRIL 2012
"Australian shares pared gains to end Tuesday slightly higher after the Reserve Bank of Australia dashed hopes for economic rejuvenation by keeping the cash rate on hold.
The benchmark ASX 200 index pared strong early gains driven by better-than-expected manufacturing data from China and strong leads from Wall Street to end the day up 7.7 points, or 0.2%, at 4,337.
The Reserve Bank said that while growth was lower than forecast, it was prudent to wait for further inflation data before considering a rate cut.
Credit Suisse sales trader Richard Post said the Reserve Bank's decision to keep the cash rate on hold at 4.25% was likely to keep pressure on retail and construction stocks for the next month, despite hints the central bank is expected to cut rates in May.
Myer closed the day down 1.8% at A$2.23 while JB Hi Fi extended this week's losing streak to close 1% lower at almost a month-low of A$10.50. Property trusts also shed 0.3% as investors feared the rate cut could further dampen demand for residential and retail property.
Metcash shares slumped 4.5% to A$4.10 after the grocery wholesaler said it will book charges and asset writedowns of between A$109 million and A$133 million as part of a broad restructuring to the group's business.
Industrial stocks were also among the day's losers, shedding 0.3% after data showing Australia's manufacturing sector contracted in March added to fears the strong Australian dollar is hurting the sector.
But the exchange's heftiest stocks--resources and the banks--kept the market afloat with small gains driven by rising commodity prices overnight and healthy manufacturing data out of the world's two largest economies, the US and China.
Rio Tinto ended the day up 0.9% at A$66.79 and BHP Billiton closed 0.2% higher at A$35.18 after Flinders Mines Ltd. (FMS.AU) said Tuesday its A$554 million takeover by Magnitogorsk Iron & Steel Works (MAGN.RS) has been delayed indefinitely, easing concerns of competition in the west Pilbara mining region.
Telstra, traditionally seen as a defensive stock, posted a 1.8% gain to close at A$3.33 as investors flocked to the high-yielding stock.
Dealers will now be looking for cues from the latest minutes from the U.S.'s Federal Open Market Committee to set the tone for what to expect from the world's largest economy, said IG Markets market strategist Stan Shamu. A sharp rally in U.S. stocks has been a key driver of gains on the ASX this year.
Australia trade balance data due out Wednesday will also be closely watched. "
Source: Dow Jones Newswires.
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
Monday, 2 April 2012
AUSTRALIAN STOCK CLOSE: - 2 April 2012
REF : DOW JONES NEWS WIRE
AUSTRALIAN STOCK CLOSE:
"Australian shares closed in negative territory Monday after climbing as high as 1% as early positive sentiment on Chinese manufacturing data and U.S. leads faded during the day.
The benchmark S&P/ASX 200 index closed down 5.9 points, or 0.1%, at 4329.3 points, after reaching a high of 4377.5 points in early trading.
U.S. stocks closed higher on Friday and China's Purchasing Managers Index, a key indicator of manufacturing activity released over the weekend, climbed to 53.1 in March, its highest level in 12 months, from 51.0 in February, which was well ahead of expectations of 50.5. Traders said the PMI showed that recent concerns about China's economic growth may have been overstated.
Mining stocks, which are closely tied to China's economic growth, were boosted on the data, with BHP Billiton up 1.5%, Rio Tinto up 1.2% and Fortescue Metals up 2.4%.
The big four banks -- ANZ, Westpac, Commonwealth Bank of Australia and National Australia Bank -- were all down 0.3%-0.9%.
Shares were hit by investors concerned about Australia's economy after the Australian Industry Group-PricewaterhouseCoopers Australian performance of manufacturing index fell 1.8 points to 49.5 in March, indicating a contraction in activity.
Building approvals for houses and apartments were also a concern, falling in February a seasonally adjusted 7.8% from January, which was worse than expectations of a 0.1% rise.
Leighton continued to fall after its profit guidance downgrade last week, with its shares closing down 1.2% after Deutsche Bank downgraded the company to a sell.
Qantas also had a bad day, down 3.4%, after JP Morgan downgraded the airline to 'neutral' from 'outperform' while expressing caution about fiscal 2013 earnings forecasts given strong domestic capacity growth potentially putting more pressure on yields.
Hastings Diversified also continued to fall, down 7.4%, after Australia's competition regulator voiced concerns about a takeover bid by APA Group. Shares in APA rose 1.8% to A$5.19. "
Source: Dow Jones Newswires.
AUSTRALIAN STOCK CLOSE:
"Australian shares closed in negative territory Monday after climbing as high as 1% as early positive sentiment on Chinese manufacturing data and U.S. leads faded during the day.
The benchmark S&P/ASX 200 index closed down 5.9 points, or 0.1%, at 4329.3 points, after reaching a high of 4377.5 points in early trading.
U.S. stocks closed higher on Friday and China's Purchasing Managers Index, a key indicator of manufacturing activity released over the weekend, climbed to 53.1 in March, its highest level in 12 months, from 51.0 in February, which was well ahead of expectations of 50.5. Traders said the PMI showed that recent concerns about China's economic growth may have been overstated.
Mining stocks, which are closely tied to China's economic growth, were boosted on the data, with BHP Billiton up 1.5%, Rio Tinto up 1.2% and Fortescue Metals up 2.4%.
The big four banks -- ANZ, Westpac, Commonwealth Bank of Australia and National Australia Bank -- were all down 0.3%-0.9%.
Shares were hit by investors concerned about Australia's economy after the Australian Industry Group-PricewaterhouseCoopers Australian performance of manufacturing index fell 1.8 points to 49.5 in March, indicating a contraction in activity.
Building approvals for houses and apartments were also a concern, falling in February a seasonally adjusted 7.8% from January, which was worse than expectations of a 0.1% rise.
Leighton continued to fall after its profit guidance downgrade last week, with its shares closing down 1.2% after Deutsche Bank downgraded the company to a sell.
Qantas also had a bad day, down 3.4%, after JP Morgan downgraded the airline to 'neutral' from 'outperform' while expressing caution about fiscal 2013 earnings forecasts given strong domestic capacity growth potentially putting more pressure on yields.
Hastings Diversified also continued to fall, down 7.4%, after Australia's competition regulator voiced concerns about a takeover bid by APA Group. Shares in APA rose 1.8% to A$5.19. "
Source: Dow Jones Newswires.
The Impact of Inflation and the Repo Rate on Government Bonds
A good Article from PSG Asset Management.
"In the fixed interest world, there are many variables which influence the yield on government bonds. The two most important, however, are the Consumer Price Index (CPI) - the broad basket measure of inflation - and the repo rate - which is set by the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB).
We rely heavily on the level and expected future path of inflation, as measured by CPI. This determines whether a nominal government bond is delivering a positive real return, first and foremost. Usually, we expect a real yield of around 2 to 2.5% over inflation before nominal bonds offer value. However, in the world of The New Normal, we are noticing that many countries, South Africa included, are running negative real policy rates in order to kick-start growth and to try and escape the debt trap that austerity is threatening. The implication for longer-dated real yields is that they are lower than one would usually expect.
The most recent CPI release in South Africa surprised positively, showing that inflation was only 6.1% in February – a pleasant surprise in the face of a market consensus expectation of 6.4%. This is encouraging for three reasons: the extent of negative real rates is slightly lower (only -0.6% versus a more extreme -0.9% implied by consensus), the likely peak in CPI will be lower, and CPI seems likely to return to the target range of 3% to 6% sooner than previously expected.
The repo rate is the other key variable which has a major impact on how government bonds are valued. At the March 2012 Monetary Policy Committee (MPC) meeting held by the SARB, the repo rate was held constant at 5.5%. As bond investors, we need to anticipate when the SARB will hike or cut interest rates. In a rising interest rate environment, one wants to be invested in short-dated bonds and cash and in a falling interest rate environment, one wants to own long-dated government bonds.
The unchanged repo rate was very much expected by the market. However, this MPC was all about the tone of the SARB statement. We spend a great deal of time analysing the MPC statements, as well as evaluating the questions and answer session after their issue. We do this in an attempt to assess whether the MPC is being dominated by the Doves (those seeking to prioritise growth over inflation, with a preference for lower rates) or the Hawks (those seeking to ensure inflation returns to the target range, regardless of growth concerns, with a preference for higher rates). That the SARB has allowed inflation to breach the upper end of the 3% to 6% CPI target range shows that the Doves have thus far dominated the MPC under Gill Marcus.
Our overall assessment was that this MPC statement was more dovish than the market had been expecting. The peak in CPI has been adjusted down to 6.5% in Q2 2012. It appears that the SARB expect CPI to return to the target range in the latter part of 2012, and in Q1 2013 it is anticipated that the average CPI for the quarter will be 5.6% - safely back in the range.
Importantly, inflation expectations have remained anchored around the upper end of the inflation target range. The SARB believes that cost push pressures remain the main drivers of inflation. What could force the SARB to hike rates would be a move towards more broad-based, second-round inflationary pressures, or demand driven inflation.
The clincher, for us, was the fact that an interest rate hike was not discussed at all by the MPC. There is now a very real possibility that the SARB might go through the entire up-cycle in inflation without having to hike interest rates. This would mean that the impact of rising inflation will be felt through a steepening yield curve. Once the peak of inflation has been confirmed, the yield curve will start to flatten again, and then long dated government bonds will start to offer value."
"The PSG Angle is an electronic newsletter of PSG Asset Management. To subscribe or read more, please go to to www.psgam.co.za".
"In the fixed interest world, there are many variables which influence the yield on government bonds. The two most important, however, are the Consumer Price Index (CPI) - the broad basket measure of inflation - and the repo rate - which is set by the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB).
We rely heavily on the level and expected future path of inflation, as measured by CPI. This determines whether a nominal government bond is delivering a positive real return, first and foremost. Usually, we expect a real yield of around 2 to 2.5% over inflation before nominal bonds offer value. However, in the world of The New Normal, we are noticing that many countries, South Africa included, are running negative real policy rates in order to kick-start growth and to try and escape the debt trap that austerity is threatening. The implication for longer-dated real yields is that they are lower than one would usually expect.
The most recent CPI release in South Africa surprised positively, showing that inflation was only 6.1% in February – a pleasant surprise in the face of a market consensus expectation of 6.4%. This is encouraging for three reasons: the extent of negative real rates is slightly lower (only -0.6% versus a more extreme -0.9% implied by consensus), the likely peak in CPI will be lower, and CPI seems likely to return to the target range of 3% to 6% sooner than previously expected.
The repo rate is the other key variable which has a major impact on how government bonds are valued. At the March 2012 Monetary Policy Committee (MPC) meeting held by the SARB, the repo rate was held constant at 5.5%. As bond investors, we need to anticipate when the SARB will hike or cut interest rates. In a rising interest rate environment, one wants to be invested in short-dated bonds and cash and in a falling interest rate environment, one wants to own long-dated government bonds.
The unchanged repo rate was very much expected by the market. However, this MPC was all about the tone of the SARB statement. We spend a great deal of time analysing the MPC statements, as well as evaluating the questions and answer session after their issue. We do this in an attempt to assess whether the MPC is being dominated by the Doves (those seeking to prioritise growth over inflation, with a preference for lower rates) or the Hawks (those seeking to ensure inflation returns to the target range, regardless of growth concerns, with a preference for higher rates). That the SARB has allowed inflation to breach the upper end of the 3% to 6% CPI target range shows that the Doves have thus far dominated the MPC under Gill Marcus.
Our overall assessment was that this MPC statement was more dovish than the market had been expecting. The peak in CPI has been adjusted down to 6.5% in Q2 2012. It appears that the SARB expect CPI to return to the target range in the latter part of 2012, and in Q1 2013 it is anticipated that the average CPI for the quarter will be 5.6% - safely back in the range.
Importantly, inflation expectations have remained anchored around the upper end of the inflation target range. The SARB believes that cost push pressures remain the main drivers of inflation. What could force the SARB to hike rates would be a move towards more broad-based, second-round inflationary pressures, or demand driven inflation.
The clincher, for us, was the fact that an interest rate hike was not discussed at all by the MPC. There is now a very real possibility that the SARB might go through the entire up-cycle in inflation without having to hike interest rates. This would mean that the impact of rising inflation will be felt through a steepening yield curve. Once the peak of inflation has been confirmed, the yield curve will start to flatten again, and then long dated government bonds will start to offer value."
"The PSG Angle is an electronic newsletter of PSG Asset Management. To subscribe or read more, please go to to www.psgam.co.za".
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