We are in for an exciting week! On Sunday or Monday President Ramaphosa will announce his newly appointment Cabinet. The decisions made here will be a signal of his power and intention as President – so far it is looking good. David Mabuza, Deputy President, has not taken his oath of office and neither has Nomvula Mokonyane – Minister of Environmental Affairs, who has been accused of taking bribes. Other ministers who will not be sworn into Parliament are Malusi Gigaba and Baleka Mbete.
- President Xi Jinping has warned his country of “difficult times” ahead, referring to the escalating trade war with the US. This shows China’s unwillingness to back down from US pressure and a certain bullying personality who thinks he is very good at making deals.
- Technology stocks have taken a tumble this week amidst fears that tech is being dragged into the trade war. This came after the news that Huawei had been blacklisted by the US.
- Steve Mnuchin, US Treasury Secretary, has said that the next round of tariffs on China are at least a month away as they study the impact the tariffs will have on American consumers. The next round of proposed tariffs is on $300 billion in Chinese imports.
- Theresa May has resigned as Prime Minister – she announced that she will step down on 7 June 2019. This came after she tried to pass a new Brexit deal, which looked very similar to the old deal but there was space for asecond referendum.
- Indian stocks and the Rupee rallied this week as Prime Minister of India, Narendra Modi, looks to have retained power in the country’s elections.
- The major foreign indices have reacted negatively with the Dow, S&P and MSCI ACWI World being down 1% to 1.3% for the week and down 4% to 4.4% for the month-to-date, in USD. However, the US markets have opened positively as at the time of writing.
- On Sunday or Monday, President Ramaphosa will announce his hopefully reduced and more efficient Cabinet. There is a fair amount of excitement surrounding this, here is an interesting article from the Daily Maverick anticipating his moves.
- Deputy President David Mabuza avoided taking the oath of office in Parliament this week. He said that his decision was in an effort to clean up his reputation. It currently seems as though he will be excluded and there has started to be speculation on who will replace him, some contenders are: Dr Nkosazana Dlamini Zuma (as anticipated in the article we sent you last Friday by Professor Sarakinsky), Naledi Pandor, and Lindiwe Sisulu.
- The South African Reserve Bank has kept repo rates unchanged at 6.75%. Two out of the five members of the Monetary Policy Committee voted for a cut of 25bps, signalling a possible reduction in the future.
- As speculation surrounding Eskom’s debt (R500 billion in bond and loan debt) mounts, the state utility has opted to stay mum, keeping investors in the dark.
- The ALSI has reacted slightly worse than global markets, being off 2.5% at the time of writing for the week and 6.5% for the month-to-date. We’re looking to the Cabinet announcement to shift sentiment locally, which would be against the tide of offshore markets.
- China is to be up-weighted in the MSCI EM Index on the 29 May 2019. This is partially at the expense of South Africa and may be a contributing factor to the under-performance of the ALSI and the rand. This had a negative consequence the last time it happened in 2017.