International
In a surprise move, the Bank of Japan raised rates for only the second time since 2007 to 0.25 %, the highest level in 15 years. This forced investors to bail out of carry trades in which they borrow the yen at low rates to invest in dollar priced assets for higher returns.
Japanese stocks plunged on expectations for further monetary tightening in the country, exacerbating a global selloff following weak US economic data and tech earnings. Japan’s stock market posted the largest 2-day drop in history (larger drop than the Black Monday crash of 1987).
Source: Fund Focus
Global markets followed suit, with measures of volatility shooting up by the most on record in a single day, reviving memories of past crises. The rebound in the latter part of that week was a positive sign, with US economic data supporting the recovery.
Global markets cheered the dovish comments from US Fed Chair Jerome Powell after his speech at the Jackson Hole Symposium. The US dollar weakened and equity markets rose broadly after investors now have greater confidence in a September interest rate cut. US Fed Fund Futures have started to price-in the probability of deeper rate cuts over a shorter period.
Federal Reserve Chair Jerome Powell sent a straightforward message to markets in a key speech in Jackson Hole on Friday, saying "the time has come for policy to adjust”. Data also showed that 818,000 fewer people were employed in the US economy as of March, suggesting reports have been overstating the strength of the job market over the last year. Powell said that elevated inflationary pressures are unlikely, so rate cuts are on the cards. A fine balancing act will be required to manage market perceptions. Cutting too much might scare the market that something is not under control.
The world is sitting on record levels of cash in retail bank deposits, and South Africa is no different, with over R 1,8 trillion sitting on the side lines. May this downward move in interest rates be the catalyst to the unlocking of this floodgate?
Kamala Harris has accepted the Democratic nomination for president, vowing to “strengthen, not abdicate” America’s global leadership. Harris raised four times as much money as Trump last month, bringing in $204mn. Some bookmakers now believe Harris has a 50.1% chance of winning the election - a two-point gap over Trump who is at 48%. However, some still see Trump as leading the race, so the outcome is still unsure.
Fed held rates at a 23 year high of 5.25%-5.50% but signalled that it may be making its first cut in September. Markets expect FED to make three consecutive 25bps rate cuts in September, November and December.
The Gold price hit at an all-time high of near $2 510/oz due to expectations of interest rate cuts by the Federal Reserve. This coupled with increased geopolitical tensions and robust central bank-buying has sent bullion over 20% higher so far this year.
Source: Trading Economics
The Bank of England cut rates to 5% in the first cut since early 2020 and signalled further reductions ahead.
President Volodymyr Zelensky has confirmed for the first time that the Ukrainian military is conducting a cross-border offensive inside Russia's western Kursk region. Kyiv launched the surprise attack and has advanced more than 10km (six miles) inside Russia.
Russia launched several waves of missile and drone attacks targeting scores of Ukrainian regions. This is Moscow's biggest air attack of the war on its neighbour.
A round of high-level talks in Cairo meant to bring about a ceasefire and hostage deal to temporarily end the 10-month Israel - Hamas war in Gaza ended without a final agreement. Talks at lower levels are still taking place.
South Africa
The JSE saw its Top 40 index reaching a record high on August 19, fuelled by positive global economic data out of the US which alleviated fears of a recession.
South Africa’s inflation rate slowed to 4.2%, down from 4.6%. It was expected to be 4.4%, bolstering the argument for a potential rate cut by the SA Reserve Bank.
Further good news is that South Africa has been without load shedding for more than 150 days, with some power stations running at low levels due to an over-supply of power. However, a shortage of transmission lines is still causing areas to experience a lack of power.
Citi Bank has raised its forecast for SA’s GDP growth to 1.2% this year and to 2% next year, citing the positive effect of the two-pot retirement reform, lower inflation and expected interest rate cuts boosting spending. The bank projects that inflation will average 4.1% in the fourth quarter. It expects a 75-basis point rate cut in September, November, and January. This is roughly in line with other forecasts.
Source: Trading Economics
The rand remains a highly volatile currency, as it turned positive during August. The currency outperformed other emerging currencies and even the dollar, euro and sterling over the last three months. South Africa is currently at a sweet spot as far as economic and political indicators are concerned.
Source: Fund Focus
The following table is the result of eight asset managers being tested about the currency’s performance over the next year.
Source: Glacier Bull and Bear Report
The following table is a valuation of the SA equity market, performed by the same asset managers. For this reason, many asset managers have enhanced their exposure to local equities.
Source: Glacier Bull and Bear Report
One of the concerns regarding the local market is the number of companies that have delisted on the JSE. This makes the playing field smaller and more concentrated, and the JSE will have to change to lure more companies back to the exchange.
Source: Momentum Invest
On a political front it seems as if many of the appointed ministers in the GNU are stepping up to the challenge. However, in some municipalities the DA and ANC have split up, with different coalitions that have been formed.
One of the shocks of the month was when Floyd Shivambu left the EFF. The heat is on to decide whether the EFF or the MK are more revolutionary than the other. Mzwanele Manyi resigned a week before to also join MK.
Snippets from the market
Chief Justice Raymond Zondo says goodbye
Stats SA says it has been advised by its technical experts not to release key data from the 2022 census, as it seems to be flawed.
Home Affairs Minister Leon Schreiber told parliament that his department (Home Affairs) is in a systemic crisis, undermining South Africa’s national security.
The government owes billions in rates and taxes to cash-strapped municipalities across the country, with provincial government departments accounting for most of the debt (R18.6 billion for rates and taxes).
The Investigating Directorate against Corruption became a permanent unit within the National Prosecuting Authority.
The uMkhonto weSizwe party announced that Floyd Shivambu will head up the party’s central management.
News reports say international banking group HSBC Holdings is currently exploring a sale of its South Africa businesses, rather focussing on Asia.
Nedbank faces a potential repayment to Transnet of R10.5 billion relating to questionable financial transactions.
South Africa’s retail sector performance in June beat expectations, pointing to some recovery in consumer confidence.
The National Transmission Company of South Africa has appointed 19 local contractors to assist in expanding the country’s grid capacity.
The Health Department says with the declaration of mpox as a global health emergency, it is intensifying tracing and screening activities at the country's borders. 24 cases and three fatalities were recorded so far.
The second-largest gem-quality diamond ever found – a rough 2 492-carat stone – has been unearthed in Botswana’s Karowe mine. Ground penetrating X-rays helped to make the discovery
South Africa was placed fourth, behind Seychelles, Mauritius, and Egypt, on RMB’s 2024 “Where to Invest in Africa” rankings. High unemployment and inequality weigh on the country’s attractiveness.
The official unemployment rate increased by 0,6% from 32,9% in the first quarter of 2024 to 33,5% in the second quarter of 2024, reaching a record high of 8.4 million unemployed people.
Al Jama-ah councillor Kabelo Gwamanda has resigned as executive mayor of Johannesburg. The ANC’s Dada Morero was appointed in his place.
Cape Town’s record-breaking rainfall in July 2024 was nearly as extreme a climate event as the severe drought that struck the region between 2015 and 2018.
United Nations Secretary-General António Guterres has called for Africa to be given a permanent seat at the UN Security Council.
Israel and Hamas have agreed to three separate, three-day, zoned pauses to allow for the mass vaccination of 640,000 Gaza kids against polio.
Source: Daily Maverick
10 new members of parliament were sworn in, including Brian Molefe, Lucky Montana and Siyabonga Gama – all of whom have been implicated in the Zondo Commission of Inquiry.
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