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Last week...

28 September 2004 Angelo Coppola

The rand was strong last week, following confirmation of news that a foreign bank was considering buying a stake in a local bank.

The local unit firmed to R6,42 against the US dollar on Thursday from a previous close of R6,56. Against the euro and the British pound, the rand strengthened to R7,94 and R11,57 respectively from R7,99 and R11,76 in the previous week.

Bond prices rose further, with yields on the longer dated R153 2010 and the R194 2008 falling to 8,64% and 8,29% respectively from 8,65% and 8,35%. Local markets were closed on Friday for a public holiday.

Money market rates continued to decline, except for the yield on the 12-month NCD, which was unchanged at 7,70%. The yields on the 3-, 6- and 9-month NCDs declined to 7,45%, 7,60% and 7,70% respectively on Thursday from 7,70%, 7,65% and 7,75% a week ago. The 3-month jibar eased to 7,25% from 7,32%.

A decline in resource-based stocks, due to some recovery in the rand, limited gains in the overall equity market, with the FTSE/JSE all-share index closing relatively unchanged at 11515,1 on Thursday from the previous week’s close of 11513,3.

The resources index was down by 1,1% or 126,1points to close at 11234,8 from 11360,9. The financial and industrial indices showed gains of 1,0% and 0,6% respectively, closing at 11088,8 and 9618,7 on Thursday from the previous week’s close of 10979,0 and 9559,3. The gold index gained 2,5% or 49,1points to 2041,7 from 1992,6.

Growth in capital investment eased marginally from 14,5% in the first quarter to 10,5% in the second quarter but remained broad based. Capital spending by public corporations increased further in the second quarter, while capital formation by the private sector slowed to 5,5% in the second quarter from 9,5% in the first quarter.

Spending by general government remained at low levels in the first half of the year.

South African Airways continued with its fleet renewal programme, while infrastructure maintenance in the communication sector provided a further boost to capital formation.

Key economic releases due this week include consumer inflation for August on Wednesday.

Producer inflation, trade data as well as money supply and private credit extension figures for August will all be out on Thursday.

The Economic Unit forecasts that headline consumer inflation eased to 1,0% % y-o-y (0,0% m-o-m) from 1,6% y-o-y in July, while CPIX is expected to have eased to 3,8 % y-o-y (0,0% m-o-m) from 4,2% y-o-y in July. This is slightly lower than the consensus expectation of 3,9% for CPIX inflation.

These numbers will benefit from the 24c/litre drop in the petrol price during August. Producer inflation is expected to have risen to 1,3% y-o-y (0,1% m-o-m) in August from 0,7% y-o-y in July.

M3 money supply growth is forecast to have increased to 12,8% y-o-y from 11,3% in July, while growth in bank credit extension, excluding the volatile investments and bills discounted categories, is expected to have risen to 10,45% y-o-y (1,1% m-o-m) from 9,45% in July.

The volatile trade account is expected to show a surplus of R800million from a deficit of R500million in July.

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