Month: February 2012

SA bonds and the rand: Are the stars for SA infrastructure spending aligning?

The risks of investing in emerging market foreign currency denominated debts have continued to recede as the Eurozone debt threat to global financial markets has diminished. RSA sovereign debt is no exception in this regard. The credit default swap (five year) risk spread on RSA debt was 202 bps at the beginning of 2012 – it is now nearly 30bps lower. The spreads on Russian and Brazilian debt have declined similarly as we show below, with Brazil continuing to enjoy a significant debt premium over RSA debt.

Click here for the full report:
SA bonds and the rand 21 Feb 2012

Retailers and the JSE: explaining a success story

It seems clear that the retailers listed on the JSE are not expected to realise long term growth in earnings at anything like the rate at which earnings have been delivered over recent years. However they are no more demandingly valued today than they have been over the past 10 years. JSE retailers have provided excellent returns over the past year and they may well continue to do so.

Click here for the full report:
Retailers and the JSE Jan 2012 Monthly View

Retail spending: We told you so

Stats SA has confirmed the strength of retail sales volumes in December 2011. Strong intimations of this had been provided by cash in circulation and by the trading statements of the retailers themselves – and indeed by the share prices of the retailers themselves to which we have drawn attention.

Click here for the full report:
Retail spending we told you so 17 feb 2012

Interest rates: MPC stays in the hole it has dug for itself

(From 20 January 2012)
The Monetary Policy Committee (MPC) kept rates unchanged, as expected. We would suggest that this reveals a more dovish, growth sensitive tone with a further strong emphasis on the cost push nature of inflation (to which the Reserve Bank should not be expected to react).

Click here for the full report:
Interest rates MPC stays in the hole 20 Jan 2012

Global bond markets: Opportunity taken in much calmer debt markets

(From 13 January 2012)
SABMiller and the SA government have in recent days been able to take advantage of the appetite for fixed interest lending by borrowers with favourable credit ratings. The government was able to raise US$1.5bn of 12 year money at 4.665%. SABMiller plc was almost simultaneously able to raise over US$7bn in a variety of maturities at significantly better terms: $1bn maturing in 2015 at 1.85%; $2bn at 2.45% maturing in 2017; $2.5bn of 10 year money at 3.75% (compared with the 4.665% the government paid for 12 year money); and an additional $1.5bn of 2042 notes with a yield of 4.95%.

Click here for the full report:
Global bond markets 13 January 2012

Vehicle sales: Benz with the remover

(From 11 January 2011)
The quality of the Naamsa unit vehicle sales statistics for December 2011 has been damaged to a degree by the refusal of Daimler-Benz to release their December sales to Naamsa, citing (rather strangely) European competition authority concerns. Presumably the competition authorities could not object to the firm announcing its own sales – the practice in the US. However a “conservative” Naamsa estimate of 920 unit Mercedes sales in December has led Naamsa to estimate total unit sales of 45 200 in December 2011. To misquote Shakespeare: The vehicle sales number doesn’t alter when it alteration finds, or “Benz” (bends) with the remover to remove.

Click here for the full report:
Vehicle sales 11 January 2012

Talking Point: A New Year wish – with encouragement from the ECB

(From 23 December 2011)
The ECB has finally acted as a lender of last resort (without limit) to the European banks, who had been threatened by the weakness in the European Government bonds they hold. These bonds are now being used as collateral by the banks for three year money from the ECB at 1% per annum.

Click here for the full report:
Talking Point A New Year Wish

Currencies: A structurally weaker euro?

(From 14 December 2011)
The big new story in the currency markets is not the weakness of the rand or the strength of the dollar – but the weakness of the euro. The euro, which was worth as much as 1.417 US dollars on 27 October, is now trading at close to 1.30

Click here for the full report:
Currencies Structurally weaker euro

The SA economy: Now to sort out the supply side

(From 12 December 2011)
Spending grew significantly faster than output in the third quarter. The growth in spending by households picked up only marginally, to a 3.7% annual rate in the quarter, with household spending on durable goods growing at a highly robust 17.9% annual rate, while spending on non-durables hardly advanced at all and spending on services supplied to households grew at a pedestrian pace of 2.5%.
Click here for the full report:
The SA economy – Now to sort out the supply side

The rand and emerging markets: It all makes consistently good sense

(From 6 February 2012)
The rand has strengthened in recent weeks in response to global equity markets and in particular to the recovery in emerging market (EM) equity markets. Such responses are entirely consistent with the patterns of the exchange value of the rand since 2008. As we have often pointed out, the rand is an emerging equity market currency: where emerging equity markets go, so too goes the rand and this year is no exception.
Click here for the full report: The rand and emerging markets

The Hard Number Index: Maintaining the recovery

(From 7 February 2012)
The SA economy in January 2012 continued its strong recovery from the recession of 2009, moving forward at a more or less constant speed according to our Hard Number Index of economic activity (HNI).
Click here for the full report: The Hard Number Index – Maintaining the Recovery 7 Feb 2012

The SA economy: Unwelcome mystery – but welcome attention to infrastructure

One could not imagine anything less likely to cause a flutter in the market dovecote than a most welcome improvement in the appearance of the note issue and the symbols it presents. But the mysterious media notice on Friday afternoon of a matter of national importance to be announced by President Zuma, with the Minister of Finance and Reserve Bank Governor Marcus in attendance on Saturday afternoon well after all markets had closed had the market, our colleagues and no doubt our peers across SA imagining both the good (less government intervention in the market place) and the bad (more interference) that could be in store for us.
Click here for the full report: The SA economy after Zuma’s Speech