Markets - The week in Perspective
The week in perspective
The rand was on course for gains of more than 2% against the dollar,
despite some profit taking on Friday, after Moody’s signaled it was unlikely
to strip South Africa of its last investment grade credit rating this year.
The past week produced mixed results on the economic front. The rand was on course for gains of more than 2% against the dollar, despite some profit taking on Friday, after Moody’s signalled it was unlikely to strip South Africa of its last investment grade credit rating this year. Moody’s lead analyst for South Africa said on Thursday there was “little chance” the country would be downgraded at a rating review scheduled for next month. The currency strengthened to around R14.93 against the USD and R17.36 against the euro.
Moreover, Moody’s Investors Service is upbeat about SA companies, saying deep and liquid local debt capital markets have reduced the need for South African companies to borrow abroad, which makes them less vulnerable to a financial crisis than peers in Turkey and other emerging markets. About 38% of South African non-financial corporate debt is denominated in foreign currencies, according to Moody’s. That compares with 56% for Turkey, or an amount of $336 billion. The agency even changed its outlook for SA’s banking system from negative to stable.
Unfortunately, that is where the good news ends. The increasing rand weakness against the US dollar does not bode well for the fuel price in October. Should the current weak currency prevail, South Africans could expect a major increase in the price of petrol in October, with the price of Brent crude oil at $78.36 per barrel.
Internationally, US officials reached out to their Chinese counterparts ahead of the imposition of additional tariffs on $200 billion of imports from China, that is on top of the tariffs on $50 billion worth of goods already in place. High-level talks are expected to take place in Washington before the end of September.
Turkey’s central bank defied the wishes of Turkish president Recep Tayyip Erdogan by raising its interest rates. Facing spiralling inflation and a cratering currency, the Central Bank of the Republic of Turkey raised its short-term funding rate by 6.25%, from 17.75% to 24%.
US trade talks and the actions of the Turkish central bank place emerging markets on a better footing than a week ago and should have a positive impact on local markets and the rand.
The school holiday and long weekend ahead offer some of us a well-deserved rest and a break away from the pressures and challenges of the economy.
SECURITAS – Wealth Management
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Market data provided by I-Net | News article provided by Securitas with 4D Wealth