Local market indicators shrug off bad news – for now
We are just weeks away from elections with many voters unsure who to vote for or if to vote at all.
The petrol price went up steeply, the economy is marooned, corruption news continues to come thick and fast and the public protector, a loose cannon at the best of times, is investigating President Cyril Ramaphosa for monies received from sleaze machine Bosasa.
As fast as we throw billions Eskom’s way to keep the diesel generators running, it presents new bills of even more billions it wants from us. It will now only be okay if it can somehow reduce its R420-billion debt by R250-billion or so.
Billions have been stolen, but even though the perpetrators are named in any number of reports and inquiries, none is yet to see the inside of a courtroom, never mind attend a fitting for an orange overall.
Copies of the book, Gangster State: Unravelling Ace Magashule’s Web of Capture by Pieter-Louis Myburgh, were torn up at a launch in Sandton on Tuesday. Magashule, the ANC’s secretary general, will now presumably take steps to make sure no ANC members were involved.
The International Monetary Fund (IMF) this week downgraded its growth projection for the South African economy for 2019 to 1.2% from 1.4% and to 1.5% from 1.7% for 2020, citing policy uncertainty after the May elections.
We are hoping for more political clarity after May 8 but, depending on the outcome, may actually have less certainty than now. If the ANC does badly, will Ramaphosa survive as leader?
If you want to look on the bright side, as Fin24 did, you could note that the IMF’s projected 1.2% growth for this year is a considerable increase — 50% — on last year’s 0.8%.
And you could find justification in that we are not alone: the IMF has downgraded its global growth projections.
“A year ago, economic activity was accelerating in almost all regions of the world,” it says in a blog on its website. “One year later, much has changed. The escalation of United States-China trade tensions, needed credit tightening in China, macroeconomic stress in Argentina and Turkey, disruptions to the auto sector in Germany, and financial tightening alongside the normalisation of monetary policy in the larger advanced economies have all contributed to a significantly weakened global expansion, especially in the second half of 2018.
“With this weakness expected to persist into the first half of 2019, our new World Economic Outlook projects a slowdown in growth in 2019 for 70% of the global economy. Global growth softened to 3.6% in 2018 and is projected to decline further to 3.3% in 2019,” the blog says.
But if bad news seems to be crowding out any good news, local market indicators appear not to be taking notice. The rand slipped below the R14 to the dollar mark on Wednesday and remained below this level for the day, the 10-year RSA government bonds traded at 8.45% — yields not seen for more than three years — and the JSE all-share closed at 58 382, a seven-month high. In contrast, the latest business confidence figures came in at a seven-month low.
Independent analyst Johann Biermann tweeted: “USDZAR below R14. Yesterday our All Bond Index closed at an all-time high. Pretty amazing given SA’s current risks and outlook.”
But it is largely international factors, mainly expectations of the US interest rate cycle, which drove our better fortunes this week.
Whereas until recently the US Federal Reserve was seen to be most likely to continue to hike rates, it has hit the pause button and cuts could be more likely now. This puts emerging markets, South Africa included, back in favour.
The May 8 election could see the continuation of Ramaphosa-led reforms and the neutralisation of Magashule and his supporters. Until then, we’ll hold our breath.