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Wednesday, 28 September 2011 - 20:00
Charts
Exchange, Inflation, and Interest Rates
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Last week saw the release of the latest inflation numbers and the Monetary Policy Committee’s (MPC) pronouncement on interest rates. On Wednesday, inflation came out at 5.3% year on year (no change from the 12 months to the end of July). Thursday’s MPC pronouncement was for no change in interest rates, with the repo rate remaining at 5.5% and the prime lending rate at 9%.
At the same time since the beginning of the month (less than 3 weeks ago) we have seen the rand lose considerable value to developed market currencies. At the end of August, US$1 would have cost just under R7, it now costs over R8 (over 15% depreciation).
These three indicators are useful in most of our lives. Interest rates dictate our monthly repayments on home, car and other loans if we have any debt, or the rate we receive on any fixed income savings. While the inflation rate can vary widely from individual to individual, the national inflation rate gives us a sense of how fast prices of goods and services are rising. It sometimes appears that the exchange rate doesn’t have a direct impact on us unless we’re involved in the import and export business or are planning an overseas trip, but the chart below shows just interlinked all these indicators actually are.
In a country with inflation targeting (such is the case in South Africa), changing the repo rate is the main method to guide inflation. Raising the rate increases the interest/debt burden for companies and individuals, and generally results in debt being paid down, the economy slowing, and inflation falling (and vice versa with falling rates). As a lot of inflation is imported (through global pricing for commodities, goods, and services) the level of the rand has a direct impact on the inflation rate and by extension interest rates.
With the head of the MPC, Gill Marcus, seemingly placing more of a priority on economic growth than her predecessor Tito Mboweni did, it will be interesting to see if and when she changes interest rates should the weaker rand translate into higher inflation. The argument until now for leaving rates at 30 year lows is that the inflation in the economy is cost push inflation as opposed to demand pull inflation (i.e. inflation isn’t as a result of strong economic growth, but rather external factors that can’t be controlled by the repo rate).
For now there hasn’t been much debate about interest rates as the inflation rate has stayed within the target range of 3% - 6%, but there will no doubt be some interesting debate if/when inflation moves out of this range. If the rand stays above R8/$ (or weaker) for an extended period this debate will most likely happen sooner than expected.
Take care,
Mike Browne
info@seedinvestments.co.za
www.seedinvestments.co.za
021 9144 966
Top News
![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnewsimages%252F2011-09-28T130821Z_01_AJOE78R10HZ00_RTROPTP_3_OZABS-SAFRICA-RAND-20110928.JPG "A CHILD HOLDS A FIFTY RAND NOTE.") The rand inched up against the dollar on Wednesday after South Africa's finance minister said he was seeking ways to stabilise the currency, and longer-end government bonds came under pressure on oversupply concerns. Full story ![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnewsimages%252F2011-09-28T105240Z_01_AJOE78R0U7U00_RTROPTP_3_OZABS-SAFRICA-MARCUS-20110928.JPG "Central bank Governor Marcus gestures as she addresses businesspeople in Soweto") The global economy is close to another "Lehman-type" event, and South Africa needs to cushion itself by reducing its dependence on European export markets, South African Reserve Bank Governor Gill Marcus said on Wednesday. Full story |
 Chinese authorities came under fire on Wednesday after the worst subway train accident in 42 years raised fresh concerns that the world's second biggest economy was sacrificing safety in the rush to develop. Full story  NATO peacekeepers in Kosovo (KFOR) reinforced troops at a border crossing in the ethnic Serb north on Wednesday, a day after more than a dozen people were injured in clashes. Full story  Muammar Gaddafi is believed to be hiding near the western town of Ghadames near the Algerian border under the protection of Tuareg tribesmen, the Libyan official leading the hunt for the deposed leader said. Full story |
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Markets |
Gold fell 1.5 percent
on Wednesday as the U.S. dollar gained on doubts over the
progress of Europe's efforts to tackle its debt. . . Full story |
Caution as Greece faces its
next hurdle to avoid a default drove stocks and commodity
prices lower on Wednesday and capped gains in. . . Full story |
U.S. stocks were little
changed on Wednesday after a three-day rally as investors
waited to see if an audit of Greece's finances would. . . Full story |
Britain's top shares ended lower
after a choppy session on Wednesday, with investors nervous
ahead of an audit of Greece's finances to determine. . . Full story | |||
European shares snapped a
three-day winning streak on Wednesday as hopes for imminent
political action to contain the region's debt crisis were capped
by. . . Full story |
Australian shares rose 0.9
percent to a one-week high on Wednesday, boosted by gains in big
miners and some banks in follow-through buying. . . Full story |
Japanese shares inched up on
Wednesday but struggled to hold gains with traders selling into
strength as optimism over Europe's efforts to resolve. . . Full story |
China's stock market dropped 1
percent on Wednesday to nearly a 15-month closing low, weighed
down by financial and property stocks, as investors. . . Full story | ||||
SA Business |
South Africa needs to work harder to boost the current sluggish rate of creating jobs, with the employment still well below. . . Full story |
Ghana annual producer price inflation index rose 17.24 percent in August, from a revised July figure of 13.94 percent, with mining. . . Full story |
Maize deliveries to South African silos rose to 9.295 million tonnes in the week to September 23, up from a revised. . . Full story |
South Africa's rand held its gains of the past two sessions against the dollar on Wednesday and could struggle to firm. . . Full story | |||
South African stocks fell 1.6 percent on Wednesday, failing to sustain a rally from the previous session as uncertainty about a. . . Full story | Denmark-based LM Wind Power, the world's largest manufacturer of turbine blades, is considering establishing a plant in South Africa to supply. . . Full story | South African power utility Eskom said on Wednesday it had sold 250 million rand of its ES26 bond due in 2026. . . Full story | It is a project that should symbolize the transformational benefits of hosting the 2014 World Cup -- a sleek new monorail. . . Full story |
Company News |
Shareholders are referred to the announcement released on SENS on 23 September 2011 ("the announcement") which, inter alia, detailed Putprop's annual. . . Full story |
Omnia shareholders are advised that at the duly constituted annual general meeting of Shareholders held on Wednesday, 28 September 2011, all. . . Full story |
The board of directors of Lonfin advise that its earnings per share for the year ended 30 June 2011 are expected. . . Full story |
Further to the cautionary announcements dated 18 August 2011, 23 May 2011 and 6 July 2011, shareholders are advised that Wescoal. . . Full story | |||
The directors of Pinnacle Point have applied to the JSE for suspension of its securities with immediate effect following the notice of motion received by the company on Monday, 26 September. . . Full story |
Central Rand Gold Ltd is disappointed by the South African Department of Mineral Resources' ("DMR`s") decision to cancel the company's mining right, notification of which was received by the company on. . . Full story |
Shareholders were advised that following the announcements on SENS on 4 August 2011 and 30 August 2011, the company posted a circular to shareholders on 28 September 2011 , relating to. . . Full story | |||||
Company Results | The results showed that revenue increased by 38.2% to R773 million, compared to June 2010 of R559.3 million. Net attributable profit. . . Full story | Revenue for the quarter increased to R221.9 million (2010: R174.7 million). Gross profit grew to R34.9 million (2010: R28.2 million), operating. . . Full story | Maiden interim results for Holdsport as a listed company showed sales of R547 million. Gross profit amouted to R270.7 million and. . . Full story | Revenue declined to R1 351.3 million (R1 356.3 million). Net attributable profit surged to R117.2 million (loss of R7.4 million). In. . . Full story |
World Markets (Spot Prices)
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics| Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
|---|---|---|---|---|---|---|---|---|
| 28/09/2011 | 165 | 183 | 78 | 426 | 245,121,585 | R11,723,965,394 | 105084 | 3008022 |
| 27/09/2011 | 261 | 112 | 82 | 455 | 324,128,466 | R15,194,670,689 | 118382 | 3003265 |
| 26/09/2011 | 139 | 223 | 82 | 444 | 446,064,084 | R14,236,072,927 | 120183 | 3511827 |
| 23/09/2011 | 111 | 259 | 66 | 436 | 360,263,164 | R17,681,511,150 | 148007 | 3381375 |
| 22/09/2011 | 84 | 295 | 76 | 455 | 343,357,592 | R16,082,172,240 | 145026 | 3013650 |
Major Moves Up
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Index Summary
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Latest Consensus Changes**
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Results Expected**
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Stock Exchange News Service
| Date | Time | Headline |
| 28/09/2011 | 17:40 | Putprop Limited - Update to the Notice of Annual General Meeting |
| 28/09/2011 | 17:40 | Village Main Reef Limited - Correction to the reviewed results for |
| 28/09/2011 | 17:05 | Avusa Limited - Resignation of group chief executive officer |
| 28/09/2011 | 16:47 | Growthpoint Properties Limited - Dealing in securities by executive |
| 28/09/2011 | 16:40 | BIIIPL - iNguza Investments (Proprietary) Limited - Listing of New Financial |
| 28/09/2011 | 16:38 | Gold Fields Limited - Dealing in securities by Director |
| 28/09/2011 | 16:26 | ArcelorMittal South Africa Limited - Exercise of share options and |
| 28/09/2011 | 16:15 | ACL141 - Absa Bank Limited - New Financial Instrument Listing |
| 28/09/2011 | 16:00 | OML - Old Mutual plc - Form 8.3 |
| 28/09/2011 | 16:00 | Dorbyl Limited - No change statement, posting of annual financial |
| 28/09/2011 | 16:00 | Masonite (Africa) Limited - Unaudited interim results for the six months |
| 28/09/2011 | 15:47 | Massmart Holdings Limited - Notification of director`s dealing in |
| 28/09/2011 | 15:44 | Murray & Roberts Holdings Limited - Annual integrated report and |
| 28/09/2011 | 15:31 | Naspers - Notification in terms of Section 122(3) Of The Companies Act And |
| 28/09/2011 | 15:30 | Naspers Limited - Directors dealings |
| 28/09/2011 | 15:26 | Massmart Holdings Limited - Results of General Meeting |
| 28/09/2011 | 15:24 | Sable Holdings Limited - Reviewed provisional consolidated condensed group |
| 28/09/2011 | 15:11 | Moneyweb Holdings Limited - No change statement and notice of |
| 28/09/2011 | 15:03 | Adaptit Holdings Limited - Dealings in securities by a director |
| 28/09/2011 | 14:59 | IVA203- iVuzi Investments Limited - New Financial Instrument Listing |
| 28/09/2011 | 14:56 | Universal Industries Corporation Limited - Results of General Meeting |
| 28/09/2011 | 14:51 | Pan African Resources PLC - Further announcement regarding the posting of |
| 28/09/2011 | 14:10 | Excellerate Holdings Limited - Reviewed consolidated results for the year |
| 28/09/2011 | 14:00 | Avusa Limited - Exercise of share-based incentives by, and delivery |
| 28/09/2011 | 13:40 | AA02 - Anglo American SA Finance Limited - Interest Rate Reset announcement |
| 28/09/2011 | 13:25 | Iliad Limited - Appointment of Chris Booyens as an executive director |
| 28/09/2011 | 13:24 | Rare Holdings Limited - Voluntary announcement -trading statement |
| 28/09/2011 | 12:56 | Murray & Roberts Holdings Limited - Dealing in securities: announcement in |
| 28/09/2011 | 12:24 | INL/INP - Investec Limited/Investec plc - Form 8 (DD) |
| 28/09/2011 | 12:22 | INL/INP - Investec - FORM 8 (DD) |
| 28/09/2011 | 12:14 | Omnia Holdings Limited - Results of the Annual General Meeting |
| 28/09/2011 | 12:10 | SCIB - The Standard Bank of South Africa Limited - Notice of expiry of |
| 28/09/2011 | 12:00 | Sea Kay Holdings Limited - Trading Update |
| 28/09/2011 | 12:00 | London Finance & Investment Group P.L.C. - Trading statement |
| 28/09/2011 | 11:51 | Foneworx Holdings Limited - Dealings in securities by director |
| 28/09/2011 | 11:29 | Skinwell Holdings Limited - Results of the Annual General Meeting |
| 28/09/2011 | 10:23 | Wescoal Holdings Limited - Renewal of cautionary announcement |
| 28/09/2011 | 10:21 | Simmer and Jack Mines Ltd - Disclosure of significant holding of Simmer |
| 28/09/2011 | 09:50 | INL/INP - Investec Limited/Investec plc - Disclosure in accordance with Rule |
| 28/09/2011 | 09:30 | Pan African Resources PLC - Posting of Annual Report and Notification of |
| 28/09/2011 | 08:14 | Pinnacle Point Group Limited - Request for voluntary suspension |
| 28/09/2011 | 08:00 | Central Rand Gold Limited - Response to cancellation of mining right |
| 28/09/2011 | 08:00 | Caxton And CTP Publishers - Annoucement to shareholders |
| 28/09/2011 | 07:59 | GLD - NewGold Issuer Limited - Partial De-Listing of Newgold Debentures |
| 28/09/2011 | 07:47 | GDO/GGM - Gold One/Goliath Gold - Further update on the acquisition by Goliath |
| 28/09/2011 | 07:46 | Hwange Colliery Company Limited - Statement to shareholders (For the six |
| 28/09/2011 | 07:30 | CPI/CPIP - Capitec Bank Holdings Limited - Unaudited financial results for |
| 28/09/2011 | 07:30 | Growthpoint Properties Limited - Annual financial statements and |
| 28/09/2011 | 07:30 | Cadiz Holdings Limited - Notice of General Meeting |
| 28/09/2011 | 07:24 | Allied Technologies Limited - Summarised consolidated unaudited interim |
| 28/09/2011 | 07:10 | British American Tobacco p.l.c.- Transaction in own shares |
| 28/09/2011 | 07:06 | INVS - Investec Bank Limited -Issue of stock warrants |
| 28/09/2011 | 07:05 | INVS - Investec Bank Limited - Issue Of Stock Warrants |
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