Financial News 28th August 2023

Market overview
The FTSE/JSE All Share closed last week at 73 836.00, increasing by 1.03%. The oil & gas and financials sectors increased by 9.13% and 3.15% respectively during the week. The technology and telecommunication sectors decreased by 3.40% and 2.36% during the same period.
Looking at the MSCI indices, developed markets increased by 0.74% during the previous week while emerging markets increased by 0.52% over the same period.

SA inflation continues its decline
Consumer price inflation moderated further in July, to 4.7% year-on-year, compared to 5.4% in June. Inflation peaked at 7.8% in July last year and is now comfortably back inside the Reserve Bank’s 3-6% target range. Food and non-alcoholic beverages, housing and utilities and miscellaneous goods and services were the main categories contributing to year-on-year inflation, which is expected to now remain within the SARB’s target band. External price pressures have eased somewhat, however local factors such as the price of electricity as well as the weaker rand should continue to exert upward pressure.
Although the current high interest rate environment is undesirable for borrowers, investors have been able to capitalise on the high yield available from low-risk asset classes such as cash. PPS Investments is currently overweight SA cash in multi-asset portfolios and well positioned to take advantage of the current interest rate climate. We prefer cash to long-dated government bonds given the fiscal outlook, while the foreign fixed interest opportunity set is also much broader than it has been for many years

Rate hikes could continue
In a speech last week, Federal Reserve Chair Jerome Powell emphasized the potential necessity for the US Federal Reserve to implement additional interest rate hikes in order to effectively manage inflation. Powell noted that the economy has been growing faster than expected and that consumer spending has not subsided materially which could keep inflation pressures high. He reiterated the Fed’s determination to keep its benchmark rate elevated until inflation is reduced to its 2% target.

Thanks to PPS Investments for the weekly market overview.

Lower inflation boosted the rand and the JSE: fuel prices remain under pressure
South African equity prices recovered somewhat last week on the back of a stronger rand and the lower-than-expected inflation data. Statistics South Africa released the consumer price index numbers for July 2023 last Wednesday. Read the full IOL article here>

Oil inches down on jitters over Chinese growth and US rates
Crude rose in early trade before paring gains as Beijing’s move to halve stamp duty on stock trading temporarily boosted prices. Read the full Business Day article here>

China measures lift Asia stocks; treasuries steady: Markets wrap
Asian stocks advanced, fueled by China’s support for its equities market and remarks by Jerome Powell that the Federal Reserve would “proceed carefully” on whether to raise interest rates again. Read the full Moneyweb article here>

Why South Africa has investors on edge this week
Capital markets are on edge over South Africa’s deteriorating fiscal outlook, say economists at the Bureau for Economic Research (BER), with government data on revenue expenditure out later this week likely to be of particular interest to investors. read the full Businesstech article here>

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