This week has been politically vibrant. From Trump stepping away from his proposed health care plan sighting, “Nobody knew that healthcare could be so complicated” opting to move onto tax cuts. To Zuma recalling Pravin Gordhan from an international investment roadshow, amongst alarmed whispers of a cabinet reshuffle and the removal of the Finance Minister.
- In the US, the Donald Trump halo effect is seeming to fade. Since he was unable to pass a new Healthcare plan through Congress on Friday there has been heightened questioning over whether he will be able to pass through his promised tax cuts. This in effect has caused a “risk-off” reaction in the markets.
- Janet Yellen, Chair of the Federal Reserve, is due to make a speech this evening, on workforce development.
- Tomorrow, in the UK, British Prime Minister Teresa May, will start the two-year process to negotiate the exit from the European Union.
- Ahmed Kathrada, the much-respected struggle hero, passed away on the morning of the, 28 March 2017.
- The US’s “risk off” has meant a move away from equities to bonds, this is especially influencing mining companies. BHP Billiton has fallen by 26% in rand terms since its high in late January 2017. BHP has been further affected by a six-week long strike at the world’s biggest copper mine in Escondida, Chile – apparently costing the company $1bn. The company’s share price on the JSE is back to where it was in March last year.
- The JSE Mining Index is also at a similar level to what it was a year ago having lost 20% from its high at the end of January and is down -6.6% year-to-date.
- Zuma has recalled the Finance Minister, Pravin Gordhan, from an international investment roadshow. Bloomberg has reported that Zuma has told leaders in the South African Communist Party that there will be a cabinet reshuffle where Pravin Gordhan will lose his position.
- The rand has reacted badly to this speculation by falling by 4% so far this week.
- In rand terms, the JSE All Share Index (ALSI) is trading sideways at the same level as it was a year ago, the same level as it was in July 2014. In dollar terms this looks very different – the ALSI is up 22.7% over the last year and 12.5% so far in 2017, this is due to the rand strength against the dollar.
- The current account deficit narrowed sharply during Q4 2016, falling to 1.7% of GDP from a revised 3.8% of GDP in Q3 2016 (previously reported as -4.1%). This largely reflects a strong improvement in the trade balance, which swung from a small deficit of 0.2% of GDP in Q3 to a surplus of 1.3% of GDP in Q4.
- The biggest share in the JSE Industrial Index, Naspers is up 9.6%. Richemont, the second biggest share in the Industrial Index is up 7.1% in 2017.
- Finance Minister Gordhan issued a statement last week saying that some R20bn in VAT refunds were claimed but not paid out at the end of February, out of R129bn refunds claimed in the 2016-17 fiscal year to February. This comes after he gave permission to the tax ombudsman, Bernard Ngoepe, to investigate claims that South African Revenue Services (SARS) was deliberately delaying VAT refunds to inflate its tax receipts.
- On the data front, headline and core CPI inflation both eased in February and squared with market expectations. Headline CPI fell from 6.6% year-on-year to 6.3% owing to an overly optimistic view on food prices while low base effects lead core CPI inflation lower from 5.5% year-on-year to 5.2%.
Source: Dynasty, Stanlib, Efficient Select, Prescient, Moneyweb & Bloomberg Markets etc.