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It has been a volatile week as emerging markets compound the pressure of global market weakness.
Federal Reserve chairman Ben Bernanke announced a further $10Bn tapering of current stimulus programs which has witnessed renewed strength in the greenback. Advance GDP data indicated quarterly year on year growth of 3.2%, a minor miss on consensus forecasts.
Manufacturing data out of China confirmed marginal industry contraction for the first time in six months adding to severe market jitters catalyzed by questions around the country’s financial system. News of the RMB 3 Billion trust and possible default thereof created the unease and fear of contagion within the sector.
Reserve Bank Governor Gill Marcus increased the repo rate by 50 basis points on Wednesday. Although current inflation readings remain well within the targeted band, a significantly weaker rand is providing concerns around the inflationary outlook.
The move follows the emerging market trend which has seen countries like India and Turkey also raising lending rates. The rand strengthened initially on the news but resumed weakness as a result of the aforementioned external factors which are providing a risk off scenario.
Source: IG Insight, as of 17:10 31/01/2014
Source: IG Insight, as of 17:17 31/01/2014
Resource counters reasserted themselves as the outperforming sector this year on the JSE, finding relative strength as industrial and financial counters came under pressure following emerging market weakness and a surprise rate hike by Reserve Bank Governor Gill Marcus.
A fourth quarter production report from Amplats reaffirmed a much improved financial year in 2013 for the company and along with Kumba Iron ores recent trading statement, have provided positive momentum to their holding company Anglo American Plc.
Vodacom’s share price, along with that of MTN have been negatively impacted, after the announcement by ICASA that termination call rates would need to be lowered by 50% commencing March this year.
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